Farmers who don’t like making tough decisions are lucky that they’re completely tied up with seeding and the business of growing a crop right now, because the markets are offering tantalizing prices.
It’s quite incredible how strong the rally in most crops has been recently, even if you factor in the depressing factor of the U.S. dollar’s decline. Hard red spring wheat futures in Minneapolis, for example, have risen from under US $6 per bushel to about $7.75 – and they tickled the $8 level for a few moments this week. Everything’s been roaring higher, with soybeans dragging up corn which has dragged up wheat and even sad sack oats – which have no real excuse to be rallying this strongly. Unfortunately for canola growers the soybean rally, which set this whole thing off, hasn’t been as directly felt in canola because of the huge stocks and the fall of the U.S. dollar, but it’s a rally nonetheless.
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Which brings up that awful situation for a farmer: do you sell into rising prices, or do you hang on and try to benefit from your hopes that prices will inevitably go higher? That’s the question confronting any farmers not tied up in the fields, which includes farmers who seeded early and all those in Manitoba who have been too wet to put much in yet.
When things are going up they make you feel like they’ll go up forever, and you don’t want to sell too early and miss the big prices down the road. But every rally ends, sometimes with a slump, and lots of folks keep hanging on for those higher prices until well after the peak has passed, and end up with prices lower than if they’d sold on the up-slope.Â
Remember what happened in the past couple of years? Guys who sold when wheat hit $7 – a historical price achievement they wanted to lock in – felt pretty annoyed as prices roared and soared and made their neighbors rich. On the other hand, lots of guys in the full bloom of last spring and summer’s historical rally refused to sell even as much as they normally would lock-in, in the belief that things would keep going higher, and lots of these farmers ended up selling in a slumping market and getting prices not much better than those early-pricers. Some held on past that point and got really bad prices in the depths of winter.
But I think one thing is pretty clear: if you were feeling OK about pricing some of your new crop a month or two ago, you can feel even more OK now with higher prices offered. The present bullishness makes a lot of folks pull back from pulling the trigger, but if you’re focused on the bottom line and locking in a margin, some of these birds in the hand could be better than leaving them all in the bush.
As Randy Strychar of OatInsight said to me a couple of days ago: corn could hit US $5 soon, which would take oats probably to $3. But there are lots of reasons for oats – massively oversupplied and with too big an acreage this year – to slump and give farmers a very bad taste. “Five years ago farmers would have crawled over each other to get a $2 cash bid,” said Strychar, noting how farmers now aren’t leaping at miller offers for new crop of up to $2.60.
That’s the irony. An up market makes us want to hold on. A down market often makes us sell in disgust. Like I said at the start of this, farmers are so busy right now they might not have time to ponder the market. Only time will tell whether that’s a fortunate or unfortunate situation.
