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SC Iowa | I ususally focus on corn since that's my day job....but will offer a few things I see about wheat from the 30,000 foot level...
The US tends to be the global "supplier of last resort".....when wheat supplies are very tight, we tend to see strong basis levels.....anything but that and US wheat basis can sink pretty fast.....
So, your first questions to answer:
1) Is this wheat in on-farm or commercial storage?? If it's commercial that changes the cost structure quite a bit..
2) What is your time horizon for needing the money or the bin if it's farm stored?? Given that the March 2010/March 2011 carry is almost 70 cents, you could likely make a strong case for hanging onto the wheat if it's in on-farm storage, get it hedged, and just earn the carries in the market as you await a better basis opportunity. If you have your ducks in a row, that is a plan you should be able to sell your banker (if that's part of your situation)
3) What is your bias on US winter wheat plantings?? Are they small enough to start having an influence on US HRW wheat supply over the next 12-18 months?? I sure don't know that answer, but it is a part of the "can HRW wheat basis improve" question.
4) From a DTN blurb, I see that demand for HRW is off 43% through first 29 weeks of 09/10 marketing year.....is there hope for that to change over next six months....if not, those wide basis levels are likely to continue, even with smaller HRW acres and reasonable crop prospects..
net/net, you can earn your way out of this situation if you have wheat in on-farm storage and a lengthy time horizon.....it won't be as much fun as a nice sharp rally, but such is the nature of US wheat situation right now..
Ray J | |
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Local basis
