This is a guest post by Jonathon Driedger, Senior Market Analyst at FarmLink Marketing Solutions. For other grain marketing tips, check out this post.
Harvest is just around the corner and farmers’ attention will understandably be primarily focused on bringing the crop in. Hopefully most growers developed a well thought out marketing plan months ago for their 2015 production, reducing the need to make snap selling decisions off the combine. But changing circumstances and unexpected outcomes for yield or quality can force adjustments to even the most well researched plan.
There are a few things that growers should keep in mind when making any marketing decision, but can be especially helpful in the fall. First, if prompt movement is needed one should carefully weigh the fundamental outlook for each crop on your farm rather than simply selling what has the highest price or where a buyer calls with a ‘harvest special’. While there are broader trends that affect grain markets overall, each crop also has its own underlying dynamics that drive the price outlook.
Growers should be more heavily selling those crops that have relatively less upside potential, or perhaps greater downside risk. In some cases we may see a price peak near harvest as pent up overseas demand drives a very aggressive export program in the fall and early winter. Other crops have greater potential into the later winter and spring in response to tightening supplies. Some markets may simply be over or undervalued based on the longer term fundamental outlook. A solid understanding of the market structure for each crop on your farm is critical when making optimal selling decisions and maximizing revenue.
Farmers also need to be aware of changing buyer habits for some crops. It’s becoming increasingly common for buyers to bid on a specific sample rather than according to standard Canadian Grain Commission grades. This has particularly been the case for durum, lentils, malt barley and wheat. The variable quality of last year’s crop and shrinking supplies had an important influence in pulling the trend along, but we can expect this pattern to continue going forward as end users focus on those specific traits that fit their individual needs.
The move towards more sample-specific buying creates opportunities for growers, as it avoids having your grain discounted for factors that have little effect on its value to the end user. But it’s critical that good representative samples are taken all the way down to the individual bin level. This avoids the costly mistake of having shipments showing up as a different quality than what the buyer was anticipating, which inevitably results loads being heavily discounted or outright rejected.
Finally, one shouldn’t underestimate the value in stepping outside of your normal marketing comfort zone. For example, exploring what other buyers have to offer beyond the few you might usually do business with can open new opportunities. Cash brokers can add a great deal of value, particularly in some markets, as they deal with a much wider range of buyers than most farmers do on their own, and have a good understanding of who might be caught short and willing to pay a premium on any given day. Futures and options can also add tremendous value in managing risk and increasing marketing flexibility without having to make a commitment on physical grain. Expanding the marketing tool box only increases opportunities for farmers.
Harvest is an exciting time of year. May good marketing decisions help you achieve the best price possible for the crop you worked so hard at to successfully bring in.