As harvest gears up across Western Canada, producers are faced with the age-old marketing conundrum of whether to market their crops early or hold in the hope of better prices in the months ahead.
Every year is different and there are often differences in one commodity versus another. It’s a high stakes game with tens of thousands or even hundreds of thousands of dollars to be made or lost.
Little wonder that more producers are subscribing to specialized market advisory services.
In truth, the experts can’t tell you for sure whether prices will rise or fall, but they can help map out a marketing strategy and they can watch for opportunities to improve overall returns.
The price of canola has been on a downhill trend for months, but the market saw a big bounce higher on Aug. 26 when soybeans increased by their daily limit on concerns over hot, dry weather in the U.S.
A 50 cents per bushel canola price increase in just one day is exciting. Even though most of the gain was eroded in subsequent days, that demonstration of volatility may convince more growers to hold rather than selling in the fall.
Some people complain that wheat prices are not as transparent as other crops and there’s an element of truth to that statement.
In a post CWB monopoly world, you’d expect wheat prices to be widely posted and quoted, but that really isn’t the case.
Much of this probably has to do with the complexity of wheat. On canola, there’s one futures price and buyers apply their own basis to come up with a cash price. For wheat, there are many class, grade and protein content considerations.
The CWB is still offering pooling programs for wheat, as well as other commodities, but in this second year of marketing freedom, there seems to be even less appetite for price pooling.
In canola and wheat, you could sell in September or sell next January and the price difference could be $1 or $2 per bu. one way or the other. On some other commodities, the risk and reward can be even greater.
I took new crop large green lentil samples to two local buyers. The first buyer graded both Bin A and Bin B as a No. 2 and was willing to pay 19 cents a bushel for September/October movement.
The second buyer also graded Bin A as a No. 2, but they considered Bin B as a No. 1 and offered 21 cents a pound for fall movement.
Two cents a pound is $1.20 a bushel, so I’ve decided to sell Bin B. Not sure what to do about Bin A. Lentils can increase a few cents per pound in a matter of days, but that usually takes a weather event that cuts the quality at harvest.
Alternatively, lentil prices might languish through the entire marketing year, which basically describes what happened last year.
Pre-pricing appears to have been the correct decision for mustard and canaryseed. Contract prices before seeding were stronger than what the marketplace is currently paying.
Pea prices are sagging with a big crop being harvested. Feed barley has dropped substantially with the new crop starting to hit the market.
Prices of $13 and $14 for canola and $9 for peas are still fresh memories, but you may have to hold a long time if you’re waiting for those values to return.
Kevin Hursh is an agricultural journalist, consultant and farmer. He can be reached by e-mail at [email protected]