US$ vs. Oil Prices

[TOM4CWB]

Charlie;

Heard a news piece on US currency... talking about US debt being denominated in US$... as is the price of oil.

China has locked on to the US$... and rides the depreciation with glee... as they become more competitive with the depreciation.

$46/barrel US... minus 22% depreciation over the past year... equals a oil price of $35/barrel for the EU.

Can this US$ depreciation keep going?

Better question... why would it stop?

Are we going to a US$ on par with the CDN$?

What risk management do we have in place to apply this to our farm business plans for 2005?

Fertiliser prices,

Fuel, will the price of oil drop?
My bet is it will drop!

Cartels work for a limited time... supply demand will counter act a Cartel over time... Innovation will bring more energy production... we can be assured!

[Ration-Al]

A year ago people were talking about an 85 cent dollar but that it would be some years out. Today I hear people talking about par within 18 months. Big turnaround.

Oil..... energy. It takes energy to produce oil. Likewise it takes energy to produce ethanol. In either event there needs to be a net positive energy output. I still question whether all the energy inputs for feed wheat based ethanol have been accounted for. I have been assured that corn based ethanol is "energy effective".

I listened to a speaker talk about "intensive agriculture" being the solution to feeding a hungry planet without destroying the environment. With rising energy costs this will be a challenge. I agree that there will be ups and downs with oil/energy especially as we measure these costs in various currency denominations. Perhaps one day currency will be measured in units of energy (BTU or cal.). Is that a stupid concept? Primitive societies often used their most precious commodity as currency (shells, gems, metals).

Energy crops are one of the bright spots on the horizon in my opinion.

http://www.gov.mb.ca/est/energy/report02/feedstock3.html

A properly developed plan to pay farmers for storing carbon would be an important adjunct to profitability of energy crops.

[Incognito]

did you hedge the dollar, Al?

[Ration-Al]

If I knew where the dollar was going

and If I had the money to invest

I would hedge.

Coulda, shoulda, woulda.

Perhaps we should all hedge the dollar but will that happen? Absolutely not. There are some people in high places that are saying the dollar will come back down. Is that wishful thinking?

A year ago we were at 78 cents. Everybody said we were going to 84 cents. And so it did but not before it took a bit of a dive. If you had to pick the timing as well as the end point you could have lost a lot of money.

It is easy to say the dollar is going up, and perhaps right now the probability is considerably better than 50/50. So if you are a risk taker the odds are favorable. But when you factor in a requirement to predict how much of a rise will take place and when you could find a lot of options expire worthless.

[Incognito]

I despise risk but there are vehicles to offset risk.

When 12 of 13 currency traders tell me the dollar is going to 80 cents and then to 84 cents..I listen and act accordingly.

What do you think the AWB is doing differently than we are? Not being a smart ass, I wish i had time to pursue it.

[Ration-Al]

I was just trying to find that on the AWB website. They do have a number of contract options very similar to the CWB's fixed and basis type contracts. They seem to be doing a much better job of describing the risk management features of these programs. It appears that one of them allow the producer to select a forex futures value.

I think that the CWB should do exactly that. Rather than the CWB taking a position on behalf of all producers they should offer the forex as another option for producers to select so they can take whatever position suits them.

[TOM4CWB]

RationAL:

You are starting to see the light!

Let the producer make the decision... the CWB can be the facilitator... presto... the opportunity to serve and create real value in marketing our grain!

Contracts for flat priced HEAR are offered right now @ $8.50/bu for 2005 production! Forex managed... basis looked after... hedged and risk managed by the monopoly supplier and contractor of this product. The CWB can do exactly the same in specialty IP wheat and barley products...

What are we waiting for RationAL!

[Ration-Al]

What does your contract say about grade discounts and acts of god?

[agstar77]

There is no minimum or maximum production but you are discounted for quality or moisture. Quality is not usually a problem as green is low and acid content is good. Yields have been somewhat dissapointing lately. I have been growing H.E.A.R for a number of years. There are some weed issues since it is a conventional canola. I may have to take break and switch to a liberty link for one rotation. They also pay the trucking to insure segregation. Yields have varied from 25 to 45. Even at 8.50 there is not a big profit considering all the input costs.

[TOM4CWB]

RationAL;

Grade discounts 50% less than conventional Canola ($7.50/t for a #1 to a #2, instead of $15/t) and it is a production contract. 100% of whatever we grow, they accept. It is a production contract based on acres instead of bu's.

Millenium 03 is faster in maturity than any other IP canola, it was the last planted, but the first harvested by a mile. You need clean land, at least 2 years out of normal Canola, and it is non-GMO.

Ask Chairman Ritter about it! THey picked all of his up in SEPT... every last kernel..., and by the way it is a farm gate price, picked up at the bin. For us 8 crushes, 2 loads per crush, over the crop year. An advance of $300/t was deposited in the bank yesterday.

[TOM4CWB]

AGstar;

You must admit even this year, it was a stable good producer. It certainly is not the easiest thing in the world to grow... but that is the beauty of farming, isn't it? Maximise the yeild, or minimise the inputs... it is still a fair price any way you look at it!