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Senior Contributor

Re: Limiting Spec Positions

I would say that flat price is THE way wheat is sold in the PNW. CBOT wheat pit is not suited for sww for export.

 

Believe me, we are fine with this. The 'basis' game does not exist out here in the way it does for the Midwest. We are totally fine with that too. Personally I find it more transparent than the distorted game in futures. From my perspective, and probably from virtually everyone's out this way, there is little respect for the CBOT.

 

Producer/hedgers are not needed for the CBOT circus and they aren't really desired. The old stories of how much futures trading benefits producers simply aren't credible and are just a fig leaf.

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Senior Contributor

Re: Limiting Spec Positions

You have to understand that my local area is very heavy with regards to cattle feedlots.  The reason for the flat price is simple.  The last contract I signed for wet distillers which is priced monthly when converted back to a dry matter basis came out at $3.85 corn.  Feedlots have and will bump up the displacement of corn with wet distillers by as much as 60%.  There's not a lot of incentive for feedlots to bid up for corn at this time especially while we're right smack dab in the middle of harvest.  If people could only see the corn piles we've built up over the last month.  Locally, there's only one elevator left that is taking in uncontracted bushels.  Everyone else has shut down to contract bushels only.  It gives the end users even a bigger stick especially for guys who don't have enough of their own storage to store this corn crop.  Apparently, there are a lot of elevator managers concerned about lack of demand down the road.  I can't recall a time when they simply wouldn't take uncontracted bushels in the middle of harvest.  The one elevator still taking uncontracted bushels is seeing three hour lines for trucks to get dumped.  I heard of an elevator in Kansas that had 84 trucks lined up on a Sunday to dump corn.  The elevator was open from 1 to 6.  At 6 when they shut down, they had trucks that had been there for hours to dump that had to take their load home.   

 

The big run in 2008 caught a lot of end users by surprise.  They have had time to adjust to worst case scenarios.  I would bet most have a plan to deal with high feed prices by displacing with something else.  Some guys have had to pile corn on their farms.  I doubt they'll have the staying power to hold these piles much past JFM because they won't want to take the spoilage loss.  I'm guessing the end users are licking their chops for this time frame. 

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Senior Advisor

Re: Limiting Spec Positions

It seems to me the problem is the short spec position. People selling what they don't have nor can they expect to have. It is different with a producer that has available inventory or  crop growing in the field or a commercial hedging their inventory. But a spec short has nothingto offer to the market other than pure speculation.

 

It is different on the long side as they can come up with cash and take delivery but the short has no possibility of that. So that is not marketing but a casino play.

 

From a farmers perspective it is nothing more than a facticious  grain inventory competing against our physical grain and our expected production in the field. In other words we are losing sales opportunities to these charlaton paper traders. 

 

BTW who would thosespec longs buy from were there not spec short positions?

 

I contend that the CBOT is nothing more than a casino with no intent of price discovery. It's a casino with no other concern that higher volume. Volume that produces commissions and profits. It has no credibility anymore if it ever did.

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Senior Contributor

Re: Limiting Spec Positions

How are processors handling hedging?  In 2008, even Cargill became uncomfortable, if my memory serves me right.  One possibility is that if producers and processors both give up on the futures market, then we are likely to see processors offering more and more contracts and producers who don't contract may find scarce markets some times.  I'm glad I'm getting old enough to contemplate retirement.

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