LANGHAM, Sask. — “How are the crops down there?” asked the salesperson.
The farmer’s answer wasn’t something that can be printed in a family newspaper.
I heard conversations like that all over the Ag in Motion site, with many farmers from Alberta to Manitoba often facing the driest conditions they’ve seen since the 1980s.
The dry state of farmer fields didn’t seem to reduce the attendance at AIM, which saw big crowds wandering through the sprawling outdoor farm show held near Saskatoon July 18-20 to see the newest technology and hear the newest ideas.
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In fact, some noted that getting away to a farm show was a relief from looking at crops that might only yield a fraction of average.
“About 25 percent,” called out one farmer at an outlook session given by MarketsFarm’s Bruce Burnett, estimating the average yield in his area.
The markets sessions at AIM were popular, as were the booths of the many analysts, marketing advisers, buyers and brokers. At those, farmers heard a cheerier story, with excellent prices for some small crops like mustard and a suddenly brighter outlook for wheat, which has languished for months.
Sometimes the markets compensate us for bad crop production with higher prices, but you can never count on that. Farmers in other countries will try to fill in any demand we can’t meet.
But this year might be a fortunate coincidence when low production here will not likely be offset by booming production elsewhere.
As Burnett pointed out in his session, there might be lots of wheat around the world, but the critical stocks in the few countries that export significant amounts of wheat — there are only a half dozen — have fallen sharply.
American production is suffering. Argentina has had terrible problems. It’s obviously bad in Western Canada.
And now Russian missiles are hitting Ukrainian grain terminals and shutting down that major exporter’s access to markets.
“The market is reacting like there are tons of wheat around and it doesn’t matter,” said Burnett.
“But really, the situation is becoming very, very tight and it won’t take too much to tip it over.”
As always, sad reasons are behind the rise in our prices, but we need that to get through this coming drought-reduced crop year.
That means farmers are going to need to carefully steward every bushel of grain they can produce. When you get less, you need to earn more for each bushel.
This was a point pinged by Dave Crompton of OPI, the “guys with the blue cables,” who specialize in grain quality monitoring for grain storage systems.
“Why go to all the trouble, cost, the risk to produce a crop, and then just throw it in the bin?” said Crompton, who has been in the business since 1984.
He said farmers often have a blind spot when it comes to preserving the value of their binned grain, recalling an analogy that bin aeration pioneer Frank Flaman would often make.
If you put a bucket of money on top of a bin, Flaman would say, you’d be going up all the time to make sure it was still there. But if you put 100 times as much value inside the bin in grain, you might just ignore it. That blind spot could cause some farmers to lose some of the crop they need to preserve.
“It’s 100 percent of your assets,” said Crompton.
Earlier in the day in which I heard Burnett and Crompton speaking, I’d had a chat with Stephen Nicholson of Rabobank, the global agricultural bank. He’s bullish wheat too, but what he’s more certain about is that the markets are going to be unpredictable and rocked by the sort of volatility that has whipsawed commodities and crops for a year.
“That’s just going to be the norm,” said Nicholson.
With that backdrop, locking in margins is going to be more important than ever. There can be bullish or bearish factors out in the markets, but volatility is making that extremely hard to play, and farmers have to focus on business self-preservation.
“This is a margin business and we have to think of it that way and act accordingly,” said Nicholson.
Getting away to AIM was a great way for thousands of farmers to get away from drought-reduced crops that look so disappointing. And hearing that wheat could be primed for a rally was probably just the news that farmers need to cheer them up.
The next months are likely to be a wild ride, so farmers are going to need to concentrate on extracting every bushel from the fields, preserving every bushel in the bin and getting as much margin out of the markets as they can, while accepting they will never catch the absolute top of a rally.
We need to preserve every bushel we have in the bin, but we can’t expect to get every possible dollar out of the market. It’s frustrating to get a small crop and it can be infuriating trying to figure out when to sell that crop, but by focusing on protecting whatever grain makes it to the bin and then locking in some margin, this year might not pass too badly for most farmers.
