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Senior Advisor

Which market is 'right'? Cash or futures action?

Currently on the PNW coast we are +$1.65 CBOT for soft wheat cash price. It may be greater tomorrow with the usual pattern. I'm hearing corn @ +.55 in areas normally - . You tell me on soy.

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Senior Contributor

Re: Which market is 'right'? Cash or futures action?

You are looking at 2 different markets plus spot is not cash.

 

White wheat maybe the 4th largest in size which the US grows. We produce high quality WW and much is exported. In any year or smaller timeframe the cash mkt bids to attract what is needed by the export market. Demand has low volatility, supply drives it.

 

Don’t flow it but if worldwide supply is smaller, price rise further to draw out supply. In periods of excess, the mkt offers lower, lower to find a clearing price,  price where it is worth it for specs / dealers to take on inventory.

 

CBT futures cover SRW. There is little substitution of WW and SRW. SRW is grown in the corn belt and east. Futures represent the value where buyers and sellers come together guessing at May or July or Sept prices. Futures are an essential tool providing a price tool for users, inventory owners and producers. Some producers won’t use futures, especially if they do not have a bank credit tied in, but their forward sales are hedged CBT by their coop or merchant.

SRW supply is plentiful, ES/use went way up over last yr. prospects are good for a 2013. 7 let alone 8 was WAY over the COP. Over time commodities trend towards the COP.

Wheat is a commodity not a specialized new wrist watch PC.

 

Both markets are right. Producers are collecting excess premia created razed specs. 

 

A WW producer may benefit 2 fold by having a crop tht earms premium prices plus by using CBT based on SWR to hedge, you collect extra fm carry etc. Congratalations.

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Veteran Contributor

Re: Which market is 'right'? Cash or futures action?

Pritch, I think cost of production moves toward commodity value. Rent, land fertilizer last 4 yrs
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