Harvest cash wheat prices as of noon on Friday, August 26, 2016 are as follows:
SWW @ $159.95/MT ($4.35/bu)
HRW @ $155.20/MT ($4.22/bu)
HRS @ $186.53/MT ($5.08/bu)
SRW @ $167.07/MT ($4.55/bu)

Marketing Education
Options on Futures: Bear spread strategy with futures options
 
As we mentioned last week, one of the negatives to buying options is the cost or premium of the actual option. Today’s strategy is intended for those that feel the market prices may move considerably lower and wish to sell their crop and take a synthetic position to benefit from a move lower.
 
The concept of a bear put spread is to benefit our farmer if the prices slide over the timeframe chosen. Unlike an outright put option, the farmer may share the wealth, so to speak, by allowing another participant to buy from the farmer in question an option of a lower strike price than the one our farmer intends to purchase, thereby offsetting some of the cost of his put option. 
 
An example of a typical purchase would be a farmer deciding to purchase a $4.50 put option on December wheat. The December contract is currently trading at $4.40 and the $4.50 put option is trading at 18 cents per bushel. To calculate the breakeven for this trade, we take the strike price of the option and subtract the cost of that option. In this case, the strike price of $4.50 less the 18 cents premium would mean that the December wheat has to trade at $4.32 on expiry to break even on the trade. Once wheat trades below $4.32 the option becomes profitable penny for penny.
 
Let’s now look at another way the farmer could spend the same amount of premium but come out ahead of the last situation. The farmer could purchase a $4.50 put for 18 cents and sell a $4put for seven cents for a total net cost of 11 cents. This would give the farmer the right to sell the December wheat for $4.50 and profit from a move down as low as $4 (a profit of 50 cents less cost of option) per bushel if the price drops to or below $4 on expiry. Although his profit is limited to 50 cents ($4.50 - $4 = $0.50)  less the net cost of the option, his breakeven has moved from $4.32 to $4.39 ($4.50 minus the 11 cent net premium). Remember that the current price is $4.40, so the farmer would break even at this level and the option would basically still be worth the same value on expiry if the price for December wheat stayed at $4.40 until the option expired.
 
To summarize, this bear spread strategy allowed the farmer to spend 11 cents instead of 18 cents premium and raise his breakeven price from $4.32 to $4.39 by limiting his potential profit to 50 cents per bushel, less the net option cost of 11 cents. His potential profit is 39 cents per bushel if the wheat drops to $4 or lower on expiry of the option. •
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Feedback is important.  If you find this education series beneficial, please contact Marty Hibbs, Grain Merchandiser at mhibbs@gfo.ca.

DISCLAIMER: This information has been compiled from sources believed to be reliable, but no representation or warranty, express or implied, is made by the author, by Grain Farmers of Ontario, or by any other person as to its accuracy, completeness or correctness and Grain Farmers of Ontario accepts no liability whatsoever for any loss arising from any use of same. •

The Ontario Ministry of the Environment and Climate Change (MOECC) has been doing spot audits on agricultural retailers to ensure they are in compliance with the new neonicotinoid regulations. During these audits, the MOECC auditors are making sure retailers have the paperwork for Pest Assessments for farms they have sold neonicotinoid treated seed. 

Within the regulations, farmers should be aware that MOECC can also do a similar audit with farmers. •

Wheat
The deadline to report winter wheat yields is September 1. In 2016, Agricorp insured nearly 7,200 customers with about 800,000 acres of winter wheat. Agricorp pays winter wheat claims in September once harvest is complete, producers have reported their final yield, and the floating claim price is available.
 
Corn and soybeans
Agricorp understands that some producers may be dealing with severely affected crops that ​are at risk of not reaching maturity. These producers may be considering harvesting the crop early for silage or green chop. Production Insurance includes options to properly determine the yield of these crops.
 
For details about harvesting damaged or stressed grain corn, visit Agricorp’s publications page for the Production Insurance plan for corn.
 
While harvesting decisions are entirely up to the producer, customers need to contact Agricorp if they're considering harvesting crops early, so an adjuster can visit them and help them through the process. An adjuster can be in touch within 48 hours to make arrangements to inspect the damage and explain how coverage works for each scenario. The sooner an adjuster inspects the crop and explains the options, the better. This allows time to assess the situation and make any necessary arrangements for the crop. Working with an adjuster as soon as possible also ensures more accurate and timely claim payments. •

After one of the driest growing seasons on record, are you wondering what options there are to manage through anticipated future droughts? Water is the most limiting input into crop productivity and, as a result, impacts the use efficiency of all your other crop inputs. Join other interested farmers and advisors on a FarmSmart tour of subsurface drip irrigation (SDI) installations for grain crop production that show the potential of these systems to mitigate the impacts of dry weather on crop production.

What are the opportunities and obstacles that SDI systems might offer Ontario grain farmers, regardless of their soil types? This tour offers the opportunity to see installations and speak with farmers who have made this investment, and advisors who have answers to common questions: Is it paying off? How difficult is it to manage? How big is the installation job? Where can I find resources and people who can advise me? If you have any of these questions, join the tour on September 7 in the Simcoe/Delhi area.

While there is no charge for this tour, due to logistical constraints space is limited, so you must preregister to attend!

Registration and more information: https://farmsmartconference.com/
or 877-424-1300. •

The Port of Hamilton is one of the primary transportation gateways for agricultural products in Ontario. The port is home to three grain export terminals, two fertilizer terminals, an oilseed crush facility, and a new flour mill.
 
The Hamilton Port Authority (HPA) is currently undertaking a review of its Land Use Plan, to help guide growth over the next 10-20 years. How can the port develop to meet the changing needs of the agricultural sector? Your comments on a short survey are welcome as HPA plans for the future.
 
The survey will be open until October 31and is available online at: https://www.surveymonkey.com/r/AgHamilton. •

Grain Farmers of Ontario is at the Canadian National Exhibition (CNE) with the Grain Discovery Zone this year. This is a great opportunity to connect with urban consumers and answer their questions about grain farming. You can hear more about our time at the Ex in this week’s edition of Inside Grain Farmers of Ontario.
 
If you’re heading the The Ex, you can find us inside the Farm Building. The CNE is on now until September 5. •

Ontario Corn Fed Beef hosted four bloggers last weekend on a fork to farm tour that included a grocery store, a feed lot, and a cow calf operation. Ontario corn fed beef was featured at lunch and the bloggers learned about special packaging to look for in their grocery stores. Meghan Burke, Grain Farmers of Ontario communications manager, was on hand to speak with the bloggers about corn production and grain farming in the province. Tour partners included: Loblaw Companies Limited, OLG Slots at Georgian Downs, Schaus Land & Cattle Co Ltd, and Gilbrea Farm. •

All farmer-members are invited to attend Grain Farmers of Ontario’s 2016 Annual General Meeting on September 13. The business portion of the meeting will be held in the morning and all attendees will be given passes to attend Canada’s Outdoor Farm Show in the afternoon.

Location:  Quality Hotel & Suites, Vansittart Room, 580 Bruin Blvd, Woodstock, ON N4V 1E5
Agenda:
8:00 a.m. Registration and breakfast 
9:00 a.m. Meeting starts 
Noon Lunch 
1:00 p.m. Canada's Outdoor Farm Show 
1:00 - 5:00 p.m. Tony Balkwill (2015 Grain Farmers of Ontario sponsored Nuffield Scholar) at the Grain Farmers of Ontario tent on Seed Alley.
 
Accommodations: The room block at the Four Points Cambridge Kitchener Hotel is available at a first-come-first-served basis.
210 Preston Parkway, Cambridge ON N3H 5N1  (519) 653-2690
Reference: GI10AA - Grain Farmers of Ontario
Cost: $109 per night plus HST