Farmers guard promise of high price – Special Report (story 1)

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Published: February 14, 2008

Crop prices are looking so good this year that they are becoming irrelevant in many farmers’ seeding decisions.

The rally in crop commodity markets has been so widespread that farmers say there is no reason to favour one crop over another.

Instead, they are able to focus on growing crops that will do best on their farms rather than attempting to grow for the market.

“It’s a year to stick to your rotation,” said Ross Ravelli, a grain and oilseed producer from Dawson Creek, B.C.

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“No one’s talking about big swings.”

Maurice Berry of Carievale, Sask., said some years he has swung out of some crops and into others because of price outlooks in the winter, but not this year.

“We’re not looking at any major changes,” he said.

“The most we might look at is moving acres between wheat, barley and oats, but we won’t be moving acres between different groups of crops.”

Rather than engendering a spirit of recklessness, today’s high prices appear to be making farmers cautious. They don’t want to lose a sure thing.

“You’re going to stick to something you can bet on, like wheat,” said Dale Gryba of Gilbert Plains, Man.

“You’ll make money in any crop, so pick one you’re sure to harvest, that’s not going to freeze, that’s more hardy.”

That may sound like common sense, but it’s not an attitude that necessarily rules in low crop price years.

“When grain prices are low, you’ll try anything to make a buck. You roll the dice and shoot high,” Gryba said. “This isn’t a year to take chances.”

Germain Dauk of Naicam, Sask., said his main concern now is catching the overall rally rather than cherry picking crop winners and losers.

“These high prices are here now for old crop. For new crop can we capture some of that, too?” Dauk said.

“Where can we make sure we’ve got a crop we can lock in?”

Dauk likes using put options to protect against the downside, so if market considerations have any impact on his seeding decisions, it will be to favour crops such as canola, which have available options.

He’ll also be looking for what he can price through deferred delivery contracts.

Another factor that may affect farmers’ seeding decisions is the high price of fertilizer and fuel. With those threatening to consume much of the price gain, farmers want to minimize their losses.

“Our biggest challenge is trying to stay within a budget for inputs and growing the crop,” Berry said.

“There’s going to be profitability in just about anything we grow.”

Dauk said pulse crop acres might hold up well because of their nitrogen-fixing nature.

Gryba said the biggest losers may be the smallest, specialty crops. They offer too much risk when the big crops offer such good prices.

“When you grow buckwheat, you seed it, throw something in the collection plate on Sunday and pray,” Gryba said.

“We’ll stick to the more stable crops.”

He said his biggest risk will be weather. Today’s historical price rally won’t mean much to a farmer who doesn’t get a crop to sell.

“The trick is to get a crop.”

Dauk, who farms with his sons and who has seen previous price rallies, said farmers need to get everything they can from this rally because previous bear markets have left many struggling to survive.

“Some people think these prices are here to stay,” he said.

“In my opinion this gives us a couple of years to figure things out so that we don’t go through some of the crises we’ve had in the past few years.”

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Ed White

Ed White

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