There is no easy decision for farmers who want to get the most for the wheat that’s left in their bins.
Analysts say the old crop, new crop and feed grains markets are similar as the crop year moves toward its July 31 conclusion.
Holding wheat from last fall’s harvest to deliver into the 2004-05 crop year won’t likely bring a big premium.
“It depends on whether you think the world is going to be inflationary or deflationary,” said farm marketing adviser John Duvenaud.
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“One farmer’s guess is as good as another.”
Duvenaud said the slightly higher 2004-05 Pool Return Outlook for most wheat classes is close to a “carrying charge” cost, which means it is about equal to the old crop PRO plus the cost of hanging onto the grain into the new crop year.
Errol Anderson of Pro Market Communications said the similarity of 2003-04 and 2004-05 PROs means there is no huge gain to be made from holding wheat into the new year. But world wheat crops look good now, so holding on may be a mistake.
“If you do store grain, you’re storing into a larger world environment,” said Anderson.
“I would tend to move wheat sooner than later.”
Eastern Europe crop
There is a greater chance that big crops in Eastern Europe, France, Australia and North America will knock prices down than of weather problems pushing them higher.
“We could have a train wreck somewhere, but we don’t see any signs of one,” said Anderson.
Duvenaud said today’s feed wheat market may be the best opportunity.
The feed wheat market was paying more than the PRO for most grades of wheat until recently, but has fallen back close to parity, said marketing adviser Brenda Tjaden Lepp.
Still, some buyers may have better than PRO bids outstanding.
“It’s still a meaningful opportunity. Call a feed mill, call a broker or two,” she said.
“Find out what the feed wheat price picked up on your farm is, and compare that to the old crop PRO.”
A cash feed wheat price can make financial sense.
“If you can get that cash in hand now, it’s worth about eight or 10 bucks a tonne more than waiting for the top-up from the initials in December.”
Top prices
Anderson said farmers who used the Canadian Wheat Board’s early pricing options program in the spring did well for themselves.
They were able to lock in prices well above today’s PRO.
“It was just fantastic,” said Anderson.
“People who took advantage of that are going to be well ahead of the eight ball.”
Today the early payment options may not look enticing, but Tjaden Lepp said farmers should consider them for new-crop wheat before Aug. 1.
“It may not seem like a rush now, but if you’re planning on eventually opting all of your crop out of the pool and doing either a basis or fixed price contract, get as much of that (crop locked in) as is safe,” she said.
“Don’t wait until after Aug. 1.”
That’s because even though the early payment options program has extended sign-up deadlines to Oct. 1 from last year’s July 31, on Aug. 1 the CWB is likely to start factoring a bigger risk premium into the contracts.
The best deals on premiums are going to be had before the new crop year.
But farmers should still be prudent and lock in only as much production as they are certain to harvest in the fall.
“You don’t want to oversell yourself to the wheat board any more than you want to oversell cash to a picky soybean buyer,” said Tjaden Lepp.
“There are contract buyout costs and they are not any friendlier with the terms than any grain company.”
