“The price of red lentils has sure improved,” I said in the normal course of conversation with a farmer. His face went unusually sombre.
“Yeah, looks like I’ve left about $50,000 on the table,” he replied.
“Who ever thought red lentils could get to 27 or even 28 cents? Nobody I talked to was predicting that.”
While red lentils have seen a surprising price surge, the big lottery win has come to those capturing green pea prices of $17 or $18 a bushel.
The reason for the astronomical price is short supply in a commodity that can’t easily be substituted.
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Everyone dreams about selling at a big price, but you can be too greedy. More sales are made into a falling market than when prices are rising.
How do you know when to pull the trigger? There’s no magic answer.
You can follow markets closely, read market reports and talk directly with analysts. It’s increasingly common to pay a company for market advice. And you still might end up selling in the bottom third of the market on some commodities.
If analysts could predict market moves with absolute certainty, they wouldn’t need to work as analysts. They’d already be rich. However, doing research and taking advice will generally lead to better decisions in a world where price volatility seems to be the new norm.
It’s rare to reflect on marketing decisions and not have some regrets. Sometimes the missteps are devastating: big chunks of money that could have been earned with a better strategy.
Producers use a range of approaches based on their philosophy, the size of their bank account and their aversion to risk.
Some jump at an opportunity to lock in a profitable price. Their seeding plans are adjusted based on new crop pricing opportunities that will pay all the bills. For them, farming is already a big gamble. A bit of pricing certainty is welcomed.
At the other end are the bold and brash who never pre-price. They’re willing to bet that prices will turn out better than the early opportunities. They don’t want to miss out on possible bragging rights at the coffee shop. They’ll store some commodities for years if they’re not happy with the price.
Sometimes decisions are relatively easy to make. If you’re planting expensive green pea seed this spring, you may want to pre-price some of the expected production.
Contracts are available in the $12 a bu. range and they come with an act of God clause, so you’re not taking any production risk.
The cure for high prices is high prices, and you have to think that a lot more green peas are going into the ground both here and in the United States this spring. There’s always a chance that prices after harvest will be higher than $12, but there’s also a great deal of downside potential.
The pre-pricing decision isn’t as clear cut on red lentils. New crop prices are sitting at 24 cents. That’s profitable, but there’s a good chance prices will be just as good or even better in the fall.
Everyone has a different skill set. Some producers are strong on agronomics. Others excel at equipment repair and modifications. Some really enjoy marketing their crops. Others hate it.
If marketing is your weak link, get help. Just realize that even the experts don’t have a crystal ball.
