roll #2cwrs 15% protein

[tmyrfield]

I'm in a quandry, only half crop seeded and no wheat in ground, haven't sold any old crop wheat yet. Should I roll wheat to new year? i have very little confidence in cwb marketing. any and all opinions will be valued.
thanks

[wmoebis]

What is the degrading factor? There could be a chance it will blend into #1 this year depending on factor.

[charliep]

No answers but here are questions I would ask.

Market outlook. Canadian wheat excluding durum 16 MMT? Domestic
(seed, feed, domestic milling) - 8 MMT. Exports 8 MMT versus a normal
year of 13 to 15 MMT. Crop quality in the light of tighter fusarium head
blight tolerances and other issues. Third largest world wheat crop in
spite of issues in western Canada? Ability to redistribute the 5 MMT of
reduced Canadian exports in the world wheat trade matrix?

Cash flow needs of my business - particularly if 2010 stays ugly.

Is holding wheat unpriced the best use of money? Can I take cash up
front and do other things with it - assuming I am bullish and believe
prices will increase? Long futures? Buy calls? You also need a view on
long term direction of the loonie.

Didn't say whether contracted on an old crop CWB series. Next year could
offer blending opportunities but it will be blending up new crop given
what has happened to date. Would be very aware of new CGC grading
specifications coming up August 1.

[cityguy]

old crop 1-14.5's $261 / new crop 1-14.5's $229. Same bunch that marketed last year's crop is marketing this year's crop. Do you expect them to make up the $32? Realize you have 2-15's so it's not quite apples to apples, but close enough.

[tmyrfield]

thanks for replies
downgrading due to ergot, actually a"poor 3" but a grain company 150 miles away can work with it... it's all contracted with the cwb and the roll will cost $3/t.
definite cash flow will be an issue, I know I am not the only one thinking about this. bullish cdn $ so using minni wht to hedge is more complex.

I guess i better just be happy with what ever I get from them.

[redleaf]

Lots of wheat left around the world we are told, the only hope you would have of obtaining a premium would be with the protein. Apparently the hard winter wheat down south is coming off with low protein and adequate moisture in the hard red spring wheat areas may make for lower protain levels.

[btjadenlepp]

not sure why i'm doing homework for a
total stranger but here's the math:

today the spread between a 1-13.5% and a
2-15.5% in the 2009 initial payments is
$35.05/t. that's the premium you lock in
by delivering and getting paid in the
current crop year. protein is tight
which is why this is historically wide.

in the 2010/11 PRO, it looks like
they're only valuing the premium for
this grade at $18/t ($218-214=$4
discount for a #2, plus $11/t*2 for
15.5% protein).

certainly the spread in the PRO could
change by the time it becomes a final
payment next year but today they'd have
to improve it by $20/t to make this
worthwhile (the inverse in the premium
plus your $3/t roll fee).

this all assumes the inverse in the
benchmark grade is made up for too.
today it's $17/t ($235 in the old-crop
PRO vs. 218 in the new-crop PRO for 1-
13.5%).

i'm pretty risk-averse, but i think you
would have to be very bullish the wheat
market, the protein premiums and the
cwb's performance in order to justify
gambling $37/t of the value of your
wheat today, and paying all the carry to
do it.

www.farmlinksolutions.ca

[furrowtickler]

Guessing new crop pro's is like thowing a blunt dart at a dart board.

[charliep]

You may be right but taking the money up front and if you are bullish based on a market factor, replacing your position with a call or a long futures position would make more sense. As a note, the play maybe on the protein premium side but all the tools to capture this including the CWB new crop payments are blunt instruments.

Agree with Brenda by the way. Take the money and run.

[tmyrfield]

Thanks again for all the comments.
I prefer to think about this in terms of asking the smartest kids in class if they got the same answer as me. When I look out my window and see water and drowned out crops and weeds, weeds, weeds, it's easy to get bullish and think that wheat has nowhere to go but UP!!!!! My neighbors seeing the same thing agree. Folly a deux. Looking at the big picture and talking to others from away gives me a very valuable perspective.