Today’s weak crop prices make for a boring market with little incentive to sell, but farmers can still take steps to be ready when stronger prices return, say marketing professionals.
“Make sure you know what you’ve got in your bins,” said Brenda Tjaden Lepp of FarmLink Marketing.
“Maybe now is the time to get that information exactly nailed down. When the market perks up for things that are quiet now, … it’s good to have the information already written up.”
David Derwin of P.I. Financial in Winnipeg said he has been advising different strategies for different crops, but the basic message is to neither rush to price everything nor walk away from lacklustre markets.
“We’ve been doing nothing (on canola),” said Derwin.
“But we are very ready to do something.”
Pulse crops are strong and are selling furiously, but prices for wheat, canola and barley are uninspiring. Analysts expect they won’t fall much further, but they are also exhibiting few signs of rallying.
However, many farmers have bins full of crop not yet priced and are feeling an urge to get involved in marketing now that fall field operations are complete.
Tjaden Lepp said she is getting a lot of phone calls from farmers who want to market because of a sense of obligation or as something to do.
“My sense is that it’s more from a place of boredom than needing something for cash flow,” said Tjaden Lepp, who has generally recommended that farmers sit tight on unpriced crops rather than rush to lock in today’s prices.
Instead of locking in prices for most crops, she said farmers would be better off precisely pinning down the amount and quality of their grain stocks.
Those who know what they have will be able to act more aggressively when buyers become interested again.
Derwin has been protecting farmers’ wheat stocks against downside risk while leaving the upside open by developing put option spreads. In those, he has been buying one put option at a level that covers wheat prices near present market values and subsidizing the cost by writing an option at a much lower price.