I’ve always despised potpourri. Can’t stand the smell of the stuff. It smells to me like junky gift shops, pastel floral patterns and fustiness. And it seems like a bunch of things that just don’t smell good together. Too many contrasting scents colliding.
Perhaps that’s what this blog entry will be: a stenchiferous bouquet of marketing ideas for 2011, from a number of sources. This is stuff leftover from calls I made last week to some of my usual prairie brokers and advisors, and it all seems useful to me. But it doesn’t fit together very easily, so that’s why it didn’t end up in stories in this week’s paper. Too much to synthesize. It formed the background to a column I wrote, but there wasn’t space there to get into all the rest.
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So here in no particular order, are some views about marketing challenges farmers face in 2011. My comments are in parentheses, (like these). With luck you’ll be able to sniff out the good common sense in all these advisors:
Ken Ball – Union Securities, Winnipeg
“Probably the biggest mistakes that (farmers) could make in coming years, is when you get very high and attractive prices – as we have right now, we are very, very high – the market mood usually when you are this high is very bullish. It makes it seem like you never have to do any pricing, because the market can’t go anywhere but up . . .
“But the markets will repeatedly, suddenly turn and crash, and everybody will wonder why they weren’t selling when it was up there. Even though you may be bullish, the market builds that in, and there may not be a lot of drivers at a certain point to take it a lot higher.”
“Canola and oilseeds are getting up to some fairly lofty levels, but there seem to still be some things ahead that still act as drivers (higher) in these markets, possibly.”
“The best time to sell in hindsight, the best hedging opportunities, always occur when they seem to be the dumbest time on earth to do.”
(Ball said this year, when 30 percent of farmers aren’t sure their soils will be dry enough to be seeded, is ideal for using options contracts to protect against the downside risks of an unpriced crop, or as a way of opening up the upside or compensating for a small crop that ends up being almost all pre-priced.)
John Duvenaud – Wild Oats newsletter, Winnipeg:
(On the biggest mistake farmers could make in 2011:)
“Selling too soon and shorting the futures.” (Why: a high likelihood of a grain market rally this year and a lot of farmers facing production problems that could leave them exposed if they go short.)
Jon Driedger – FarmLink Marketing Solutions, Winnipeg:
“Guys are looking at good new crop prices, so on the one hand you need to respect the need to manage risk and lock-in some margins, and on the flip side if there are production risks in South America or this acreage battle heats up or we end up not getting the acres in or are delayed in Western Canada . . . we could see these markets make another leg higher.”
“Guys are genuinely concerned about being able to get a crop in on time.”
“It’s a balancing act between locking-in margin and being disciplined and yet not locking in so much you can’t take advantage of potentially higher prices, balancing that with production risks that a lot of guys face, knowing they won’t be comfortable until they get a crop in in a timely manner in decent shape.”
Errol Anderson – Pro Market Communications, Calgary:
“Don’t let your marketing guard down. Keep your marketing guard up.” (Why: production risk, and the risk of the markets all slumping if any of a dozen non-ag market factors spooks investors and spurs a flight from the markets.)
“Don’t overextend yourself on production risk.” (Many farmers have already locked-in 30 to 50 percent of their 2011 expected production. Locking-in more would expose farmers to naked risk, Errol thinks. Using options contracts to protect against the downside or open up the upside are safe ways of being prepared for this year’s markets, without risk – except premium cost.)
“Right now everything is going great guns on the grains, but there are pot-holes.”
(Errol told me farmers are getting very bullish, to the point that some flax growers say they won’t sell until flax prices are over $20 per bushel. That’s the kind of view that often doesn’t end up with good results.)
