Chad Peters has no doubt that a marketing consultant is helping him achieve a higher return for the wide range of grains, oilseeds and pulses produced on his southern Saskatchewan farm. An important, non-monetary side benefit to this hired marketing assistance is that he sleeps better at night.
Peters, who along with family members, crops about 4,500 acres of wheat, barley, lentils, peas, chickpeas and flax at Beechy, northeast of Swift Current, says there was a lot of tossing and turning over the years, trying to decide when to pull the trigger on price as he marketed his crops.
“I would read free newsletters from different companies, and also spend 25 to 30 hours per week on the Internet trying to figure out world markets,” says Peters. “And that was really 25 to 30 hours per week I didn’t have to spare.” After all that there was still the nagging question about what to do, is this the right time to sell, what are prices going to do?
After attending an FCC-sponsored marketing seminar two years ago, he enlisted the services of FarmLink Marketing Solutions, a Winnipegbased marketing company founded by Brenda Tjaden Lepp and Mark Lepp. That move has certainly taken the pressure off.
“I still have to make the final decision,” says Peters. “But when I do, I believe I have the best information available to me that day.”
Peters marketed his 2008 and 2009 crops with the advice of FarmLink. He works with local advisor Dan Hawkins, who is based in Swift Current. As the harvest of 2009 wraps up, they have already met and talked about cropping plans for 2010 and 2011. Peters hasn’t forward contracted any of the 2010 or later crops yet, but he has a good idea of what he’ll be growing.
Hawkins is part of a nine-member FarmLink marketing team that works across Western Canada. Collectively the FarmLink team is routinely in contact with world, North American and local markets, analyzing and sharing that information back and forth. The system gives each market advisor a current update on world trends and market demands used to form a basis for marketing recommendations given to individual farm clients.
PETERS CHANGES ROTATION
“For a number of years I grew half spring wheat and half durum on my farm,” says Peters. “And two years ago, durum was as high as $20 per bushel. Based on FarmLink recommendations, I switched everything to straight spring wheat in both 2008 and 2009. Some people thought I was crazy for not growing any durum.” Peters changed his rotation to produce spring wheat for the Warburton Bakery program. That’s an identity-preserved production contract where specific wheat varieties are produced at a premium price for end use by the British bakery company.
He had all his 2008 crop gone before the 2009 seeding season began. “I didn’t have the carrying costs associated with holding 20 to 30 per cent of the crop in the bin. And I’m doing the same thing for 2009. I’m not sure where durum prices are at, but they would have to be considerably better to justify the cost of that 20 to 30 per cent carryover.”
Peters also forwarded contracted a percentage of his yellow peas and red lentils and was able to sell those right off the combine. “You’re never sure what kind of growing season you are going to have,” he says. “You could be looking at selling them off the combine, or buying more bin space.” He prefers to see them sold.
Two other aspects he likes about working with his marketing advisor is developing a marketing plan that meets his cash-flow needs during the year, and having a plan and recommendations that are geared to his farm and not all of Western Canada.
“The one point the FCC workshop made is that marketing is much more involved than just looking at a few newsletters,” he says. “It takes time. And if I don’t have the time myself, it is nice to have informed marketing recommendations brought to me.”
While there is a fee for personalized marketing services, he says it takes less than a bushel per acre of wheat to cover the cost of a marketing consultant.
WHO CAN AFFORD THIS?
Hawkins has clients with a wide range of farm sizes. As a general guideline, if the active members of a family farm are cropping more than 2,000 acres per person, then they can benefit from off-farm marketing services. “If an individual farmer is trying to market more than 2,000 acres of crop him or herself, it becomes a stretch,” he says. “To do a proper marketing job requires at least 20 hours per week, and as we all know, a farmer has to wear many hats.”
Hawkins says the first step with any client is to sit down in the farm office (or kitchen table) to get a handle on the current marketing plan and get an idea of producer expectations. From there they can develop a marketing plan as well as a crop plan and crop budget based on known marketing opportunities and future trends in markets. That planning includes recommendations on what crops and even what varieties should be grown to target market opportunities. “The plan also has to consider a proper rotation, as well as individual cash flow needs,” he says.
While the marketing plan can be adjusted as markets change, the idea is to develop a plan that looks out over the next one to four years of crop production.
“We develop a plan, but marketing begins as soon as there is an opportunity,” says Hawkins. “Marketing is a 365-day a year job. It isn’t something you do after
the crop is in the bin. You have a plan, but markets change, weather changes, politics change, so it also has to be flexible and able to respond to changing conditions.”
For example, early in 2008 it looked like oats were going to have a strong price in the $3.50 to $4 per bushel range, but as the recession and world financial crisis set in, demand fell and the price dropped significantly.
“So our advice to clients in mid-2008 was to sell oats right off the combine at $2.75 per bushel,” says Hawkins. “At the same time, looking ahead there was an opportunity to lock in 2010 oats at $3.70 a bushel. So we said to clients, “It’s gut check time. How much of the 2010 oat crop are you prepared to lock in at $3.70 bushel?” We had some clients in August 2008 prepared to lock in 20 per cent of their oats at $3.70 for September 2010 delivery. Some went 50 per cent, some went 100 per cent, but a lot of them took those contracts. It all comes back to identifying opportunities and being prepared to act on them.
“Sure, some people might say what happens if oats come back to ‘$5 per bushel?’ But we have three experienced analysts looking at the market, and yes that could happen, but there is a five per cent probability. Our recommendation is based on the most probable scenario.”
FarmLink charges clients a fee per seeded acre, but as both Peters and Hawkins point out, some of the smallest marketing opportunities more than cover the cost of the service.
“Last year I had a client planning to grow green lentils, but just before seeding we found a market opportunity for red lentils,” says Hawkins. “I asked if there was any way he could find a few acres for red lentils. He made a change in rotation, seeded 120 acres to red lentils and sold those for eight cents a pound more. It was an overall difference to him of an extra $25,000, which was way more than enough to cover the cost of marketing services.”
Lee Hart is a field editor for Grainews in Calgary, Contact him at 403-592-1964 or by email at [email protected]