Pray for a brutally cold snap of weather.
It may present the only chance for a bull market you’ll see this winter.
Farm marketing adviser Errol Anderson said the New Year’s cold snap gave some producers great premium prices, and more cold might do the same.
The futures markets are not expected to offer price rallies this winter, so basis levels will be more important.
“If a guy can deliver in the cold weather, there are some premiums to be had,” said Anderson. Some buyers were offering short-term, limited amount premiums of $12-$15 per tonne over the futures to buy a few hundred tonnes on short notice.
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When the temperature drops, farmers generally slow their deliveries. If a buyer has inadequeate supply, he will often add a good premium to draw in the required grain, Anderson said.
Watching like a hawk for these sudden basis deals is probably the best market strategy this winter.
“They’re going to come and go,” said Anderson.
“These are really excellent opportunities for these guys to price some canola at those levels, because the fundamentals of the oilseed market doesn’t justify it.”
Anderson said weather reports suggesting another cold snap in late January offer the enticing prospect of better bids for barley in Alberta.
Not only would cold weather slow regular deliveries of barley to feedlots, but many feedlots have grown so accustomed to being able to buy barley cheaply and easily that they’ve left themselves short of product in late January.
A weather-related slowdown in shipments might bring these buyers into the market with premium basis levels.
“If they get caught with their pants down, they might be scurrying for barley,” said Anderson.
“They’ve been ho-hum because there’s so much feed around.”
He said cold weather basis deals are not only a way to get a better price for crops this winter, but also probably the fastest way to move those crops, because fewer producers are delivering.
“It’s a good way to get rid of those crops, because once it warms up, the system will congest again.”
He said farmers are unlikely to flood the market in the next cold snap, because there’s a reason so few don’t deliver when it’s cold.
“The problem is that you have to go out and start up the auger,” said Anderson.
“That’s the penalty you have to pay.”
