Farmers urged to be disciplined in their marketing strategy this year, planting only crops with which they’re familiar
Farmers need to be disciplined and keep their crop choices simple this spring to mitigate as much risk as possible for the upcoming growing season, says an analyst.
Ryan Denis, head of crop marketing for Canada with FBN Market Advisory, said producers should seed crops they know how to grow well, as well as be diligent in their marketing strategy to obtain the best prices.
“Keep it simple,” said Denis, speaking to farmers recently at FarmTech in Edmonton.
“Don’t plant a whole bunch of cinderella crops hoping it’s going to pan out….
“Stick with what you know and maximize what you know. 2020 is not the year to chase crazy dreams.”
Denis’s suggestions come at a time when some growers might be feeling anxious about the market and the upcoming growing season.
Harvest was tough in 2019, with lots of producers expecting to harvest last year’s crop before they can start seeding.
As well, some farmers experienced challenging harvests in 2016, 2017 and 2018, making them feel only more stressed about 2020.
“You can feel it here in FarmTech, you can feel it in this room: the pressure and stress from the past few years,” Denis said.
“I have sat down with growers, and they have told me, ‘Ryan, I lost $100,000 last year, I lost $50 an acre.’ So, with that in mind, we can’t afford not to take a profit.”
Much of Denis’ presentation focused on taking the time to see what prices buyers are offering.
There can be big spreads between companies, he said, even though they might only be a short distance apart.
“Pay your salary on price discovery,” he said.
“Take the time to figure out who has got the best price, who has got the worst price, and leverage it.”
For example, Denis pointed to price discrepancies of 30 cents per bushel for CPS wheat within the Edmonton region for an April delivery. The prices were compared on a regular Sunday, he said, adding there wasn’t anything extraordinary influencing the markets that day.
Similar spread situations can be found in canola, he added, though prices for green peas don’t seem to differ much.
With this knowledge, he said, farmers should be able to make the best decisions.
For example, sitting on a crop and hoping the price will shoot up may not be the best option if it can be locked in for a profit now, he said. This could be done through futures brokers that offer call and put options to help manage risk.
“When you see canola futures at $500 per tonne, I don’t care if it’s January, March or May 2021, that’s a pricing option for your farm,” he said.
“That’s how you average $11 canola. Take advantage of that.”
All farms will have unique situations, Denis said, so planning is important. Cash flow requirements, as well as personal history with buyers, should also be kept in mind.
He said it’s important that farmers remain patient, given prices have fallen due to the coronavirus outbreak in China.
If cash is needed in the next couple of weeks, he said patience will likely be difficult. However, for those who can wait until spring, they should hold their ground.
“With coronavirus, let the hype die down, and then figure out how many acres we are going to grow, what U.S. soybean acres will be, and what the demand for vegetable oil will be,” he said.
Denis said he isn’t worried about the number of canola acres that are expected to be planted, but he cares about oat acres because they are expected to double.
Green peas acres might also influence his marketing plan, considering that seed has been challenging to find. Durum acres are also expected to increase, he added.
It’s important not to panic, he said.
“We don’t know what’s going to happen in the next week, we don’t know what (U.S. President Donald) Trump might put on Twitter, we don’t know when the China-U.S. trade deal will matter, and we don’t know if it’s going to be dry in May,” he said.
“Don’t panic. When profit is there, take it.”