Burning Bin of Canola

I am prone to repeating stories.

It comes with age.

This story is likely one of these instances.

In the late ‘90s, I attended a marketing workshop in Rosetown with a buddy and his father.

I believe it was through the Keystone Agriculture Producers.

But that is not important right now.

What is important is the message received highlighting the risks and costs associated with grain storage.

The presenter did not understand why a producer would accept the risks and costs associated with grain storage.

We are familiar with why; however, let us explore his concept.

Often, the supply pressure during and immediately following harvest is intense and often marks the year's low price.

As a result, producers choose price speculation of the physical product while incurring the risk of theft, spoilage and the associated winter hauling costs.

In addition, the opportunity costs associated with unrealized sales and missed opportunities are often unrecognized.

The workshop presenter stressed the effectiveness of the futures market for price speculation while eliminating storage risk and cost.

Of course, this opportunity is not available for every crop; however, it is for spring wheat and canola.

Using the futures market for price speculation is an effective risk management strategy.

Yesterday, I saw this post on Twitter about a burning canola bin.

Twitter comments suggest a 25K bushel bin with 10-15K of Canola.

I won’t do the math.

We explore using the futures market for both old and new crop marketing plans in our analysis.

You can find examples of them on our analysis web page.