Wittal: Consider your contract obligations

June 26 — Financial markets were very quiet today as no real news came out that was worthy of trading to any great extent.

The U.S. dollar dropped half a cent today and the Canadian dollar climbed half a cent, closing at US86.83 cents, down 1.3 cents from last week’s close.

The Dow Jones June quote closed down 34 points at 8,438, down about 100 points from last week.

Crude oil closed down $1.07 at US$69.16 a barrel, down 85 cents a barrel from last week.

Corn closed even to up three cents a bushel today, and down 15 cents a bushel from last week.

Beans are up five cents a bushel on the nearby futures and down six to 18 cents on the forward months. The nearby bean futures are up 21 cents a bushel over last week, while new-crop futures are down 21 cents from last week.

Wheat closed up four cents to down 11.2 cents a bushel on the various U.S. exchanges. Minneapolis July wheat futures closed down 11.2 cents a bushel today, down 24 cents a bushel from last week.

Canola closed down $1 to $4.30 per tonne today, down about $6 per tonne from last week’s levels. Barley finished up $2 to close at $168.70 per tonne, down $7 per tonne from last week’s levels.

Grains were very quiet today as traders stepped to the sidelines ahead of the weekend and in anticipation of the U.S. Department of Agriculture’s stocks and acreage report, due out next Tuesday.

Wheat futures continue to fall as good harvest weather puts pressure on the futures.

This may be a good time to sit down and reevaluate your new-crop grain contract obligations, to ensure you’ll have enough grain to deliver against those contracts using revised yields based on current crop conditions.

Knowing what your contract obligations are is key to deciding what type of pricing strategy you will use going forward. If you think you are overcommitted, do you need to buy out of any contracts? Or should you use futures or options to protect yourself on those contracts if the futures should rally?

If you can’t risk pricing any more grain for delivery, should you look at futures or options as a way to secure a floor price?

Can you afford the cash to put a futures or options strategy in place? If not, should you use a line of credit to do so?

What are the risks if you do nothing?

Sometimes doing nothing may be the right thing to do, but until you have run the numbers, how will you know?

That’s all for this week. — Brian

— Brian Wittal has spent over 27 years in the grain industry, including as an elevator manager and producer services representative for Alberta Wheat Pool, a regional sales manager for AgPro Grain and farm business representative for the Canadian Wheat Board, where he helped design some of the new pricing programs. He also operates his own company providing marketing and risk management advice for Prairie grain producers. Brian’s daily commentaries focus on how domestic and world market conditions affect you directly as grain producers.

Brian welcomes feedback and information on market conditions in your area, such as current offering prices, basis levels, trucking premiums and special crops contracts. Contact Brian today.

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