9/14/15 I hate to the be the negative nancy in the room but I don’t think we are going to be seeing $8 bucks this year. The wheat complex continues to have bearish pressure applied to it at every corner, with reaching new lows on the Chicago market last week and the Aussie’s actually raising their production estimates even in the midst of the strongest El Nino seen in decades the PNW SWW market legs are getting shaky. With the US dollar remaining strong and US wheat consistently $20-25 bucks out of the world market, the USDA lowered US wheat exports projections by 25 million bu which increases our domestic carry out. Couple that with worldwide production numbers increasing on a strong Europe and Russian crop, and demand staying the same, it has created a pretty strong lid on any large rallies anytime soon. But there has been talk that all of this has already been “built” into the market, and technical guys are starting to short cover on the idea that we have almost reached rock bottom and now begins the climb up. In any case no one has a crystal ball and as a producer I am trying to take as much risk of the table as I can for this year and next if I can. I closed out my SEP HTA contract and actually lost 3 cents on it, and came away with a $6.76 cash thanks to such a strong locked in futures price. After doing that I need some cash for fall, and even though I am .80 below cost of production I need the cash flow so I decided to do a minimum price contract. With the minimum price contract I sell my cash crop at the current market price, and then I buy a call to protect myself from any futures rally that might happen in the next 9 months. So I sold my cash crop at today’s price of $5.68 and then decided I on a MARCH $5.20 call, with a cost of .28 per bushel. The cost of the call is what you owe no matter how the call performs. I pay this cost upfront and it comes out of my cash settlement, so in theory I really sold my grain for $5.40. But if there is a MARCH futures rally between now and then and it reaches above $5.48 ($5.20call+.28Prem=Strike price of $5.48) I am making a profit. Looking forward and this current moment, and the feelings that we might have touched the bottom of the wheat market, and with the US corn crop yield being lowered for the first of hopefully many times I am taking an educated risk in that Chicago MARCH futures will rally over my $5.48 strike price and hopefully gain an extra .50 or more. One way guys like to look at a call is as insurance, 10,000BUX.28=$2,800 cost with the opportunity to take advantage of any significant futures rally. I mentioned trying to take next year’s risk off the table already, as of right now I do not think next year’s prices will be any better. How do you do that if there is no cash price available? Watch the futures for next year, if we can get a $.80-$1.00 rally on any of the months next year it would be beneficial to look into entering into a HTA contract, as locking in the futures price you have a starting point, and only have the basis risk to play with.
Chicago futures closed down 5. Wheat futures gave back some of their recent gains on Wednesday, with most contracts around 6 to 9 cents lower on profit taking ahead of the Friday USDA reports. Dec15 CHI wheat was the weakest, down 9 1/2 cents, but not before extending its highs from yesterday. Trade estimates for the weekly Export Sales report span from 175,000 to 375,000 MT. Commerzbank states that the expected increases to the Australian wheat production estimate are “null and void,” due to a string of dry weather.
Pea & Lentil bids : All prices are now basis 2015 crop. New crop offers are being accepted and encouraged