Marketing Approaches For 2010-11

Prairie farmers contacted for the November Farmer Panel appear to be following a couple different marketing strategies for the 2010- 11 crop year. One approach is to sell early and then participate in the market in other ways, while others are choosing to delay decisions about the 2010 crop to see if prices improve.

Crop production and quality are all over the place as well. Some farmers report good yields and quality, some good yields and poor quality, and some good quality and poor yields.

Here is what the November Farmer Panel had to say:

TERRY YOUZMA NIPAWIN, SASK.

Terry Youzma has decisions to make about crop marketing this fall, and he says that is a good position to be in.

Youzma, who crops about 2,400 acres of grains and oilseeds near Nipawin, in northeast Saskatchewan, says with “friendly charts” — markets generally trending up — his main concern is to watch the numbers and “pull the trigger” to sell in the top third of the market.

“With canola, for example, it is an exciting market this fall,” he says, in a late-October interview. “The futures are trading over $500 per tonne. The price has broken through that resistance barrier. You can afford to have some patience, but you also have to decide when to pull the trigger and lock in a price.

“There is nothing wrong with these prices when you look at the charts historically. What you have to keep in mind is that prices don’t stay over $500 very long and when they start to slide, it is usually like going over a cliff, so you have to be prepared to act quickly.”

Youzma produces canola, Hard Red Spring and CPS wheat and oats on his farm, which this year escaped the weather extremes. “We’re in a 10-to 15-square-mile-area here where we were fortunate,” he says. “Some of our land was just on the edge of that heavy rainfall, but overall we had good growing conditions and average to slightly better-than-average yields.”

With the crop off with reasonable quality he appreciates he is in a more favourable position than many Prairie farmers. Youzma sold some tough canola off the combine to a buyer with drying facilities. While he usually has more crop sold at this time of year, he will see what the market does, will likely sell another portion of his crop this fall, and will price the rest for 2011.

He is in a good position with oats this fall as well. Because of poor production across much of the Prairies and because U.S. farm programs have favoured primary crops other than oats, there is a good demand and improving prices.

Most of Youzma’s oats have a heavy bushel weight and will likely grade a No. 1 or 2. “This year, historically, we are seeing very good prices in light of the production challenges,” he says. “Again it is a process of watching the market and selling for a good price. It doesn’t have to be the highest, but you want to catch it before it begins to slide.”

His CPS and Hard Red Spring wheat will be marketed through the Canadian Wheat Board. While the Pool Return Outlook is good, he’s looking for more information on delivery opportunities and timing of payments.

GRANT DYCK NIVERVILLE, MAN.

Grant Dyck’s marketing strategy is to get the crop sold and delivered by early winter, so he has cash flow, and then use a range of marketing tools to participate in other marketing activities up until June of next year.

Dyck, who along with his wife, Colleen, operate Artel Farms at Niverville, south of Winnipeg, says as a young farmer he doesn’t have the equity to sit on crop for a year or 18 months waiting for a “good” price.

“I know my cost of production so my strategy is to get everything priced and sold,” he says. “I don’t have to be at the top of the market with pricing, but I am keen to be in the top 95 per cent when I sell my paper. Once I have a comfortable margin over my cost of production, I am further ahead to perhaps miss a few cents per bushel, and have the crop sold and delivered, rather than having it sit in the yard.

“I think there is far greater risk in me having a 50,000-bushel bin of canola worth $500,000 sitting around, than selling for a decent price right off the combine,” he says. He figures, for example, the inefficiencies of the grain-handling system between January and March could cost him 20 cents a bushel. So he might as well risk missing a few cents on price and have the crop gone, than run a risk of greater losses later on.

Dyck, who produces about 13,000 acres of cereals and oilseeds such as winter wheat, oats, soybeans, canola and corn, all for non-CWB markets, prefers the more volatile marketplace which has evolved in recent years.

“You go back a few years and the market was flat and it was frustrating because nothing was happening,” he says. “Now it can move $2 in a day and that is exciting. There is much more opportunity to be found in a volatile market than one that is stagnant.” He uses a range of marketing tools — the future’s market to some extent, basis contracts, forward pricing contracts and call options to give him as much flexibility as possible to capitalize on profit whether the market is moving up or down.

Come early December, the 2010 crop will be sold and gone “and I may just be sitting on paper,” but that enables him to be involved in other marketing opportunities, says Dyck. That can include trading in the currency market, and looking to reduce next-year input costs by pre-buying fertilizer.

“I am no marketing expert by any means, and there have been some big-time marketing screw-ups,” he says. “But I am looking to develop a relatively simple, cookie-cutter marketing strategy, that can provide a decent return under given market conditions.”

FLOYD HAAS HILDA, ALTA.

Floyd Haas is in a holding pattern this fall with his crop marketing, waiting to get a better handle on what prices will do.

Haas who farms at Hilda in the dryland country of southeastern Alberta, says overall yields were quite good, but quality is “all over the board” particularly on wheat.

“I took samples in the other day and we have everything from No. 1 to feed wheat,” he says. “The elevator wasn’t buying anything right now, because I think they are waiting to see what is out there before they make any decisions. They say they don’t have enough good-quality wheat to mix with the poorer-quality crop.”

Haas, who usually crops about 2,800 acres, grew only Hard Red Spring wheat and peas in 2010. With good moisture the last couple years, he says wheat has been yielding well. This year his wheat yielded about 45 bushels per acre, while a more average dryland yield is about 25 bushels per acre. Peas were in the 32-to 33-bushel range.

Quality on the peas is quite good, since they were seeded early and harvested early. He hasn’t sold any yet, but says the price is around $5.25 a bushel.

Any early-seeded wheat harvested early missed the frost, but the later seeded crop was damaged, with green kernels “knocking the heck out of quality.” Feed wheat, some places, is trading for $5.25 a bushel, which is more than is currently being offered for durum.

Haas who has most of the durum produced in 2009 still in the bin, is frustrated because the durum price is less than $2 per bushel. “The other day they said my durum was worth $1.73 a bushel, while feed wheat was $5.25 bushel,” he says. “There is something wrong with this situation. A couple years ago durum was worth about $12 and now it is $1.73.

“The current PRO is better but that price hasn’t shown up at the elevator yet. We got a better price for durum back in the 1970s. Some of the older farmers may be able to hold on to it for a while, but younger farmers need the cash flow and they can’t make anything at $1.73 — nobody can.”

Haas says he heard of a recent situation of a younger farmer in the area cropping 3,000 acres and after all the bills are paid he expects to net about $27,000.

“The situation has to change whether you are young or old because you can’t keep doing this if you can’t make any money at it,” says Haas. “We’ve been fertilizing the last few years which adds another $28 to $30 per acre to your costs, but you have to do it to keep yields up. Farmers have been mining these soils for too long.

“But as costs go up to improve yield we have to be paid a decent price for these crops.”

HARRY SCHULDO SEXSMITH, ALTA.

Harry Schuldo is hoping that good quality and patience will make up some of the shortfall in crop quantity this year.

Schuldo, who farms about 3,000 acres in the Alberta Peace River region, says he will keep watching markets over the coming weeks in hopes increasing demand for higher-quality crops will further improve prices.

“Many farmers in this area, including myself, have half the yield but top quality,” says Schuldo, noting another year of drought made for a depressing growing season. “It is always a gamble but there are signs that prices will improve.”

Schuldo, who farms near Sexsmith in the central Peace, really has only wheat and oats to worry about marketing at this point. Canola averaged about 15 bushels per acre, and he sold a fair bit off the combine because the crop needed to be dried. It graded No. 1.

He even bought back canola delivery contracts as soon as he realized he would have a production shortfall. Schuldo, a director for the Alberta Canola Producers Commission, says higher quality canola is currently about $11 per bushel and may go higher yet. And he expects even those farmers in high-rainfall areas who took off high yields of poorer-quality canola should find a decent market in the biodiesel industry. He says in the Peace Region about 10 per cent of canola is grading No. 2 or lower, while in areas of higher yields as much as 30 per cent of the crop has green seed.

Schuldo is hoping his Select grade oats, which yielded about 60 bushels per acre (rather than a more average 90 bushels) will draw a higher price early in the new year.

“There is some indication now the price for high-quality oats could be around $4 per bushel,” he says. “Traditionally the best time to sell oats is between November and February. I’m playing a bit of a wild card, but I think I will wait until early 2011 and see where prices are at. I have to do something to make up for the lower yields.”

He expects with the new PRO from the Canadian Wheat Board showing Hard Red Spring wheat at about $7/bushel he will probably deliver his wheat under a fixed price contract.

Schuldo who often grows malt barley wishes he had some to sell this year. “Malt barley is in short supply and I am getting calls every day,” he says. “I wish I did have some. But that is often the way — prices are good when you don’t have anything to sell.”

LeeHartisafieldeditorforGrainewsin Calgary,Contacthimat403-592-1964orby emailat [email protected]

Farmers talking to farmers is the purpose behind our “Farmer Panel.” If you’re interested in taking part and sharing your experiences and ideas with otherGrainewsreaders, please send Lee an email at [email protected] or call him at 403-592-1964. Include your hometown, your cellphone and home phone numbers, and a photo of you on the farm.

Participating in the panel doesn’t take much time. Lee will call you two or three times a year, and the call will only take 10 minutes or so. We hope to hear from you.

About the author

Field Editor

Lee Hart

Lee Hart is editor of Cattleman’s Corner based in Calgary.

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