I’m lucky, I think as I sit in my comfy chair in my office, that I don’t have to pay my bills by selling canola this winter.
But if I had to, could I make a buck doing it? Could I even break even?
That’s what I’m about to find out.
In the coming months, your humble scribe will be putting his marketing prowess up against those of the farmers of Western Canada during the Canola Commodity Challenge at www.canolachallenge.ca.
You’ll be able to see how well or poorly I’m doing in the program, which is open to anyone who wants to play, because I’ll occasionally write a column charting my progress.
Read Also
Agriculture needs to prepare for government spending cuts
As government makes necessary cuts to spending, what can be reduced or restructured in the budgets for agriculture?
The program, promoted by the Manitoba Canola Growers Association, the Saskatchewan Canola Growers Association and corporate sponsors, allows a player to create and market a virtual crop.
A farmer can type in his amount of production and his various costs of production, then follow a number of methods of marketing it. The player can use futures contracts, cash sales, basis contracts or deferred delivery contracts.
The purpose of the program isn’t to see who is the smartest marketer on the Prairies, but to give producers a chance to use marketing tools with which they may not be familiar.
Traditionally, most crops are sold near the bottom of the market. Advisers say farmers need to make a better effort at hedging, but many are intimidated by marketing tools such as futures contracts. Eliminating that intimidation factor is the goal of the program.
I’m not completely ignorant in the area of marketing a crop. I regularly write stories based on interviews with market analysts, brokers and farmer advisers, so I pick up some knowledge by osmosis.
I’ve also taken a batch of Canadian Securities Institute courses that deal with risk management, derivatives and investing and have completed the requirements needed to apply for an options trading licence.
But I have one gigantic disadvantage compared to most of you: I don’t farm, and I wouldn’t know a basis contract if it walked up to me and said, “50-under is a good price to lock in at.”
I don’t have that year-in, year-out experience of actually selling a crop to sense whether I’m getting a good deal or if I’m buying the Brooklyn Bridge.
So I’m planning to cheat.
Well, perhaps it’s not exactly cheating, but in order to level the playing field I’m going to exploit my position as a reporter and call as many experts as I can and ask them how they would market a canola crop this winter.
Here are a couple of answers I got last week:
“There’s no obvious way to make money this year,” said one.
“Gee. That’s a tough one,” said another.
Both said there’s almost no reason to expect much better prices over the winter, unless there is a major crop meltdown in Brazil, but prices are so brutally low now that “if you don’t have to sell, don’t.”
If I can’t sell in the future or in the present, my options appear limited.I did get the lowdown on a pretty neat futures play that could net me $10-$15 more per tonne, but it’ll still leave me with a price that is likely to be disappointingly low. Unfortunately, from the analysts I spoke to, it’s the best option right now, so I’ll have to consider it.
I also called Bruce Dalgarno, a farmer in western Manitoba who has long pushed farmers to use more risk management tools and takes the task seriously.
He, like many farmers, is more bullish on the outlook than analysts and brokers, seeing a real chance for better prices in the spring.
He is no optimistic fool. Last year he played the Canola Commodity Challenge and made a profit by immediately dumping his virtual grain into the cash market as soon as the program began in January.
“I thought the price had nowhere to go but down,” he said. He was right.
This year he’s playing the game again.
He thinks crusher demand and sales to China might suck in enough canola to give prices a modest push higher in the spring, when he hopes to lock in a better price than the futures offer now.
Dalgarno has a lot of experience with canola and with crop marketing, but he knows that might not count for much in the game. Last year’s high scorer in the competition was a kid in a Manitoba high school.
So maybe the less experience you have, the better.
That’d suit me just fine.
