Big money in producers’ astute marketing

Consider two farms with the same acreage and the same yields. One has a gross return of $750,000 for the year, while the other easily tops $1 million. That’s the difference marketing can make.

The additional revenue probably came with little or no additional cost, making a huge difference in profitability between the two operations.

It’s in a year such as this when astute marketing (or dumb luck) can mean a lot of money. Prices are volatile. Some have increased dramatically (canola and feed barley), while others are stubbornly stagnant (lentils and canaryseed).

There’s no magic answer in the quest for marketing success, but there are ways to stack the odds in your favour.

Have enough storage space so you’re not marketing just to make room for the crop coming off the field. This is a chronic problem for me. I thought I had it solved this year with 25 bushels per acre of specialty canola locked in for September delivery. Wrong.

The chickpeas and canaryseed matured so quickly that they were consuming bin space before the canola was shipped. This is unhealthy sales pressure and can lead to forced marketing.

Cash flow is another evil villain in the marketing game — selling something, anything, because you need to pay expenses. Thankfully, the financial position has improved on most grain farms reducing the need to dump grain at any price.

Get good advice, but not so much advice that it clouds your judgment. Market analysts are often wrong and there’s a danger of not seeing the forest for the trees if you delve too deeply into supply and demand minutiae. I have the most respect for the analysts who advise on how much of your total crop should be priced by a particular time.

“Get at least 50 percent priced on commodity X before the end of the year. Hold off for now on selling any of commodity Y.” This is tangible and actionable. An increasing number of farmers are hiring a marketing service to make farm specific recommendations.

Remember that storage has a cost. Producers like to speculate on some commodities, waiting for the big price spike. When the price does finally increase, they get greedy thinking it’s going to the moon. Before they know it, the price has slipped and they’re back into a holding mode again.

It will be interesting to see the appeal of the CWB pooling programs. Wheat and durum pools could attract the expected 30 to 40 percent market share because it’s how farmers are used to marketing those commodities.

What about the CWB canola pool? Will that be a useful way to ensure at least an average price? CWB pooled prices will certainly be a benchmark to compare against open market prices and there will no doubt be considerable analysis, particularly on canola.

Analysts agree that hitting the high in a volatile market is almost impossible. What you really want to do is compare your price against what other producers captured. If weighted average prices for the crop year are calculated or estimated and then published somewhere, I haven’t seen them.

Sure, there are price graphs showing the fluctuations through the year, but how much was sold at the various price levels?

It’s a bit like when you were in school. Your report card mark is most meaningful when compared to the class average. Canola sold at $13 doesn’t look so good if the average marketed price ends up at $15.

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