Choppy markets the norm for a while longer as poor Corn condition has now been priced in (for the time being) and good weather on Beans is stabilizing those crop scores though continued rain is needed. The funds were massively long going into the rally and profit taking is not a one week event. Harvest underway in the lower Corn belt and low yields or not, the pipeline will be sated in the short term.
J-MAS position on nearly all crops is that Benchmarks are far enough sold that no need to sell further into a “harvest pressure” market. Improving Canola basis is encouraging but Technicals in the Short term are not favourable and we expect more chart damage and backfilling before we leg up further in the later part of this year and we look for a new highs with good basis levels.
The exact play right now should be to consider the following Yield Averages and sell any overages you were fortunate enough to experience. This will rebalance you to current Benchmarks sales positions and will book windfall profits at what are still great harvest prices. If your yields came in under the average just get to the Benchmark and no further for the time being.
Yields have been adjusted to reflect area averages on the limited data we have to date:
Canola – 45% of a 36bu Crop = a 16 bushel Benchmark. (therefore sell to 19 bushels if you averaged 39 bushels on your farm – selling the 3bu overage, locking in a big profit and rebalancing your position to 45% sold of a 36bu crop).
Lentil – 40% of a 28bu Crop = an 11 bushel Benchmark. (this is one crop where I would not sell the overage as we should be near the bottom of this market).
Pea – 40% of a 34bu Crop = a 14 bushel Benchmark. (therefore sell to 18 bushels if you averaged 38 bushels on your farm – selling the 4bu overage, locking in a big profit and rebalancing your position to 40% sold of a 34bu crop).
Eth/FdWheat – 60% of a 78bu Crop = a 47 bushel Benchmark. (therefore sell to 54 bushels if you averaged 85 bushels on your farm – selling the 7bu overage, locking in a big profit and rebalancing your position to 60% sold of a 78bu crop).
A Canola play that works perfectly in an Inverse or Backwardation market such as we are experiencing now, is to find a favourable Aug delivery basis(around 25) and then paying/capturing the spreads out to either Mar, May or July to give you a Basis contract with delivery “now” but final pricing out to Feb, Apr or June with a Basis locked in the mid-high 20’s (usually costing in the 50’s or much worse in most years) as May and July futures are actually trading at or below Nov futures and the market is actually paying you to price later and delivering now instead of charging you the $25/mt(50c/bu) it usually takes to do so. Call me on this strategy before or after you get some spread pricing from your Elevator of choice.
Last day of Mountain travel today and in better cell phone contact tomorrow.
A brief Marketing Plan Update and Sales Recommendation out tomorrow but Targets remain agressive as we shift movement into what should be an upward biased New Year as S&D’s really tighten into Seeding.