|
Ontario's middle east | When I say the basis will follow the spreads, that is within respective crop years. In other words at this point in time, the spreads can't possibly know the true new crop s and d situation. After harvest it will figure it out. I honestly don't know how reliable that is with hrs in your part of the world where freight availability is such a big factor. The lack of history in your market is a challenge and I applaud you for trying to get a handle on that. You say you are tracking US values which you should be but when you say the bid is $1 under, I suspect that is Cad and doesn't mean much in the export world. FYI with a large crop, ON has gone below $1 under US before at the water to export wheat. With your freight disadvantage you should be lower but how much depends on what east vs west export opportunities are. I suspect your local bid has some risk premium built in by the buyer but that is often the case with a lot of unknowns in the size and movement of the new crop. Keep in mind they are also giving you the right to price that contract when you see fit. That means they will end up short futures and if it is a run away weather market, may end up upside down on $3 / bu margin calls. On top of that basis pukes in that scenario and they own your basis way too high. It ain't always gum drops and lollipops trading basis. You are indeed correct though if you think the market is unfairly discounting your basis, you should continue to own it. I generally flat out recommend producers do not do CAD$ Licences to Procrastinate....errrr ...I mean basis contracts. They usually want to do it at the wrong time for the wrong reason. They think they managed some risk and fall asleep. The reality is, their risk is still the board and if that hasn't gone against them currency has and "I can't possibly price it now!!!!" Alright ..... So let's roll it into a carry market and snowball this sucker from a lesson into full blown education. We will write them but, I always run through how it's likely to play out first, they tell me why it won't, and we let'er rip. Did I mention I'm only luke warm on €ad basis contracts? | |
|
CWRS Basis
