Wheat and Canola Swaps (au) - The Combine Forum
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post #1 of 12 (permalink) Old 06-15-2013, 09:50 PM Thread Starter
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Wheat and Canola Swaps (au)

did my first foray into canola swaps last week

did wheat swaps back in january and topped up last week and wheat before with some foward sales also in jan and lately

im 30% sold foward and or on paper wont do any more until maybe august when i will see how things are progressing

canola foward selling physical is risky for me because of frosts but ive done a little

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post #2 of 12 (permalink) Old 06-16-2013, 12:23 AM
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As much as i read up on this stuff, i just cant grip it, sto is there a laymans description of how this works and why people do it? After all i am just a dumb miner.

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post #3 of 12 (permalink) Old 06-16-2013, 03:03 AM Thread Starter
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same as physical foward sale of wheat of canola
wheat last few weeks been $280 port adelaide basis deliver your wheat in nov dec get your $280 less frieght and charges etc
if price in nov dec is $250 your ahead if its $300 your behind.

swaps same thing i sell march swaps at $275 come dec jan feb next year when ever i decide to buy them back if swap price is $255 banks write me out a cheque for $20 per tonne if swap price is $300 i write them out a cheque $25 per tonne but you dont have to deliver wheat against them.

does that help ive only started last year so this is my second year

unlike canadian and american farmers who use sraight futures contracts they have margin calls if the market goes against you with swaps banks pay the calls until maturity
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post #4 of 12 (permalink) Old 06-16-2013, 03:05 AM Thread Starter
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and ps i never sell more than 30% combined minimum expected production

i really really can see australian prices at harvest being $240 port adelaide basis for me and anyone holding old seasons really shouldnt be theres been some cracker prices especially for feed barley in last 2 weeks above harvest prices of 2012
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post #5 of 12 (permalink) Old 06-16-2013, 04:07 AM
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Cheers, STO - so swaps - if you dont have to have the grain - anyone can buy them? So is it grain gambling in a sense? I can understand forward contracts etc - thats easy, i will probably dabble in this as i would like to think with my rainfall production will always occur and not get complete crop wipeouts etc from drought. I agree with your 30% plan - wise.
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post #6 of 12 (permalink) Old 06-16-2013, 05:30 AM Thread Starter
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banks wont let you do swaps unless you have grain in the ground its a hedge
if your a speculator you can use swaps but cost more than for a farmer who uses them to protect a price

like i said im new at the game as well some of the WA guys on here probably been using them successfully for years
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post #7 of 12 (permalink) Old 06-16-2013, 07:13 AM
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Been on the farm 10years and I don't understand it.
I do cash contracts with CBH and Quakers.
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post #8 of 12 (permalink) Old 06-16-2013, 10:04 AM
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ok im slowly getting the swap thing, slowly - they always publish there good news stories, so why do banks do it, do they assume they know more about markets than farmers or visa versa. with the late start and troubles with frosting in southern usa and too wet on northern usa / canada - im gonna take a punt and say prices will rise (maybe not barley around harvest time) dollar will head south with an interest rate cut helping the cause ( i work for rio tinto - and as you could imagine they are on to this stuff as our commodity prices are under pressure - even iron ore) - There are reports around suggesting a world record wheat crop - down grade reports are already starting to flow in - the grain marketing companies said they are going into this year with record low carry over, so should i buy some swaps now - assuming Jan - feb next year they will be worth more ? Im not game to forward contract crop at this stage.
STO - do you have a farm advisor to help you with this or do you go it alone?
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post #9 of 12 (permalink) Old 06-16-2013, 06:28 PM Thread Starter
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so why do banks do it to protect a price for farmers without having to deliver
swaps prices evey day be it good prices or bad tam adviser no but bank manager advises at times ie last 2 weeks they rang and said good opportuniyies to price some grain

ive got a fair bit of accumaleted debt from thje droughts through the 2000s plus upgrading machinery roster so i kinda have to get in top 25% of prices not top prices just near the top or else in my low yielding enviorment i will go back to being a sheep farmer
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post #10 of 12 (permalink) Old 06-16-2013, 06:50 PM
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Cheers STO - thanks for taking the time to explain. I will keep studying!! Think i will stick to cash but for first year, so im on my feet a bit.

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