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Ontario's middle east | A little different play book in ON. We buy everything in $CAD and mostly flat priced. We hedge it all on CME including the currency risk. In other words we are trading US basis. That is the only thing that makes sense with respect to the import/export situation. Today we were/are paying -36z for new crop. We were bidding that as +95z $cad as that is what the grower wants to be paid in. IMO that bid is 10 US stronger than it should be at this point in the season, with what we know now. So I could call Joe Grower and say we have a great bid on NC corn (100% truth), you have to lock this in now, we will set futures on a rally.
Fast forward a month and basis is flat at -36US. The $CAD has dropped from .73 to .68 and futures are now 4.50. Cash price is now 4.14US >>>> divide by .68 = 6.09 $cad
Basis=cash- futures >>>> 6.09-4.5= 1.59 $cad. The US basis didn't change but cad equivalent just went up 64c ..... and I'm called a crook..... 2 things at work. The extra exchange on the weaker dollar and the extra conversion on the rally amount (.55rally divided by .68 exch)
Some big vagaries trading basis when you live in 2 different worlds. That is why we tell our growers focus on the cash price. That is what you put in the bank and pay your bills with. Whether you get a 50c bump from the board or the currency it doesn't matter. Take it and say thank you. | |
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Basis sucks!
