Floor Talk April 11

[jennys_mn]

Ray  -  Maybe you need to enlighten us - or me - when is a sale not a sale?  And, maybe others on here can benefit by the "maybe" sale too.  And If we have these "maybe" sales, then "maybe" they shouldn't be counted as sales just to get the price to move higher, just so the "maybe" sale can be cancelled later.  Please - enlighten us - me - about how these maybe sales actually work, and I quit complaining about then, if the reason makes sense.

Jen

[Canuck5]

HI Ray,

I have also always wondered about Chinese soybean sale cancellations.  In North American business culture, a contract is an iron clad legal agreement.  There are penalties for breaking it.  Is it different dealing with other cultures such as SE Asia?

I'd like to know what the costs are to both the buyer and the seller when this happens.  The impression most farmers have is that the Chinese buyer just phones, cancels a boat load or two, and the seller is left holding the bag.   But surely that is not the case.  Are there penalties built into the sales contract for canceling?  If so, are they real, or is the penalty somehow clawed back on subsequent deals?

I guess bottom line, I'd like to understand how much this costs farmers.  I'm sure these costs are factored into the basis levels, either in anticipation of cancelations, or as 'cost of sales' after the fact.  Unless of course, the buyer has to absorb the real costs of a cancellation.

Thanks in advance Ray for any info you can share on this.

[Shaggy98]

Then there was no sale of such 330,000 tons. I too would be interested in knowing how an export cancelation is possible if it is paid for when ordered and not actually exported.

I think I'll order a new line of equipment for next winter delivery. If my 2014 crop year is a bust I'll simply pick up the phone and cancel the order.

[roarintiger1]

Every farmer in the Unted States would like to know the real answer to these so-called cancellation rules.  With all the talk since December about these cancellations, there has not been one person that seems to know the real answer.   This might be something that the producers of this wesbsite could come up with some real, hard evidence on what really happens during these events.

[hanktbd]

In our business (building equipment), we can write contracts to suit whatever both parties agree to and they sometimes have some type of escape clause. Both the contracts and the law typically provide some type of compensation for costs already incurred by victim of the cancellation and even some reasonable profit or mark up.

[M-Farmer2287]

Do that equipment order shaggy ? And I'll pick it up with a 20% discount😎 i'll pay for it with some dried out dirt!!!

[giolucas]

Cx1,

I hope so.   I am stuck..     

[Shaggy98]

M-Farmer, that is a hell of an idea. Just think, if we could get several producers around country to join our plan we could have one hell of a buying network.

Don't mention the dried out dirt, unfortunately for this area we have an entire country side of it.

[SouthWestOhio]

Here is a typical export contract. Item 22 covers default.

http://www.naega.org/images/naegacontract.pdf

[Canuck5]

Interesting-thanks for providing this.  So if a cancellation is by definition a default, there should be no impact on the bottom line for the exporter, provided they are able to manage their hedges according to the circumstances.

The impact on futures prices is less definitive. Its a matter of the cancellation (default) being one piece of market news.  How the market responds pricewise is influenced by countless other factors at the time, but it would be safe to say a well time cancellation could impact price to the advantage of .buyers.