It’s the question that haunts many farmers this time of year – when do I sell my grain?
A Saskatchewan brokerage firm is trying to make that decision easier by establishing floor prices for various commodities that farmers should not sell below.
Accounting for average yields, costs of production, export demand and global production, Johnston’s Grain Brokerage of Welwyn, Sask., has set floor prices of 25 cents per pound for canaryseed, 18 cents per lb. for lentils, $5.50 per bushel for green peas and $4.50 per bu. for yellow peas.
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The broker feels farmers shouldn’t sell those crops below the stated prices, but it is an individual decision.
“It’s a guide. There’s nothing written in stone. They can take it or leave it. It’s just a suggested floor price,” said owner Allan Johnston.
Canaryseed’s recent rollercoaster ride prompted him to establish a guideline. The crop was selling for 15 cents per lb. earlier this year. As summer progressed it went as high as 25 cents. But since the new crop has been harvested, prices drifted back below 20 cents.
“The whole idea just ticked me off,” said Johnston.
The perception that prices were falling scared many farmers who started dumping crop.
“If they would sit tight, I thought to myself after 17 years of marketing grain for farmers, and not panic, the demand would increase,” said Johnston.
With the help of John Duvenaud, market analyst with the Wild Oats Grain Market Advisory, Johnston calculated the minimum return farmers should accept on each crop, which in turn allowed him to compute a floor price. For example, using a 12 bu. per acre average yield on canaryseed, a farmer would need a price of 25 cents per lb. to get the minimum return of $150 per acre.
As new information about the 2003 harvest comes in, the floor prices may be adjusted. Farmers interested in monitoring Johnston’s floor prices must subscribe to his A.J.Bat service for $99 per year.
He plans to eventually cover all commodities. The next one will likely be oats, which Johnston thinks should have a floor price around $2 per bu.
Local farmers have told him that they have wanted a service like this for years.
Johnston said he has received surprisingly little grief from grain buyers. He added grain companies focus on earning their targeted margins and care less about what they pay for a crop.
The floor prices should also prevent farmers from getting too greedy.
“Last fall canaryseed got up to 38 cents per lb. and guys wanted 40 cents. It was absolutely asinine,” Johnston said.
