Five Tips For Effective Wheat Marketing

The global demand for wheat is expected to double over the next forty years. As Canadian wheat growers look for ways to grow more with less, they will also be seeking to manage through market volatility by marketing their crop as effectively as possible.

Wheat is a crop under economic pressure, globally, according to Norm Dreger, head of cereals for Syngenta North America. There are several challenges with growing wheat today low yield growth, low intensity acres, quality issues and low farmer profitability. Around the world, wheat is being displaced by more profitable crops and is being grown on more marginal acres.

These dynamics all have a direct effect on global production and market prices. And while it would seem that increased access to information would make marketing a wheat crop easier, in fact, the reverse may be true.

According to John DePutter, president of DePutter Publishing, a firm that specializes in agriculture market news and analysis, despite a virtual explosion in the number of media services that provide everything from the latest local weather forecast to crop conditions halfway around the world, many growers find it increasingly difficult to get the information they truly need to make the right decisions.

To help farmers market grain more effectively, DePutter offers these five tips:

PRIORITIZE AND MANAGE INFORMATION

There isn t a need formoreinformation: successful grain marketing relies on making better use of the information that s already on hand.

You need to get rid of some of the noise and minimize your time spent surfing the Internet, reading the newspaper or catching the early morning television reports, DePutter says. The fact is, you have to make decisions constantly and it s hard to make those choices with a barrage of confusing and conflicting news and opinions coming at you from multiple sources. Managing the glut of information these days is akin to separating the wheat from the chaff.

SELL INCREMENTALLY

For the work that his company does with its various clients across Canada, DePutter advises incremental sales during rallies, while avoiding dips.

If we think the long-term trend is up, we might advise clients to contract only small amounts of crop before harvest and weight our incremental sales advisories to the latter part of the marketing year. If we think the long-term trend is down, we might recommend contracting more aggressively while saving smaller portions of the crop for later in the marketing year. Either way, the idea is to spread sales out over the marketing year and to make them in several increments usually four to six.

The benefits of incremental selling are that it can prove to be low-risk, cash-flow friendly and easy on the nerves. And, in the event you erred by selling some crop near the year s lows, it ll be just one increment and likely no huge loss.

TAKE A CONTRARY OPINION APPROACH

DePutter says that if you notice most farmers are bullish, the news seems bullish, media reports are talking up higher prices and speculators are buying, consider making an incremental sale during the bullish hype.

It s during widespread optimism that markets often tend to notch important peaks, he says. The goal is to make your own personal selling decisions calmly and coolly, to make them partly based on the profitability of your business, and to avoid getting mesmerized by the bullish enthusiasm of the crowds. This is easier said than done.

LOOK AT THE CHARTS REGULARLY

You don t have to look at commodity price charts daily to get a good visual image of where prices have been and where they are currently, but checking them weekly, for example, can be useful. Charts provide a simple, visual pictorial of market action and recurring patterns, offering an uncomplicated perspective.

Maybe you ll notice, for example, that a market is trading at the high end of its range for the marketing year to-date, so you ll decide it s a good time to make an incremental sale, if only for that singular reason. Another time, you might notice that a market is in a strong uptrend showing no sign of shifting, so you might conclude you can be patient before selling more.

RECOGNIZE THE TONE OF THE MARKET

According to DePutter, one of the best indicators of commodity futures market direction is tone.

A market that fails to fall despite widespread and highly publicized bearish news has a bullish tone and the potential to move higher, he says. Similarly, a market that fails to rally despite widespread and highly publicized bullish news has a bearish tone and the potential to move lower.

So what does the future hold for wheat production, and the return wheat can deliver to growers? Dreger is optimistic, stating that, Relative to other crops, wheat technology is in its infancy. This creates an opportunity to transform wheat production through innovation, reaching for new standards in yield, quality and sustainability all of which will benefit growers.

JimBagshawisproductleadcerealsfor SyngentaCanada

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