BY JON DRIEDGER
Challengeaccepted
WITH WIDESPREAD DRY
conditions, the 2015 growing season was
a roller coaster for many farmers. Some
areas received enough rain to see larger
than expected yields, but that wasn’t the
case everywhere. A good portion of farms
in the western half of the Prairies now
have fewer bushels to sell than had been
anticipated in spring, and/or have lower
grades to work with. Both of these situa-
tions present marketing challenges.
Marketing plans are disrupted when the
farm has less grain to ship. Forward sales
that may have been made ahead of seeding
now become a much larger portion of the
total crop.
One effective way of managing risk is
breaking down sales into multiple seg-
ments. This becomes more difficult when
there is less crop to sell, and especially
when a good portion may already be
committed to earlier forward sales. This
puts more emphasis on making the best
decisions possible for the rest of the crop.
It’s important to remember that while
the Prairie crop was smaller than had
been anticipated in the spring, most other
regions in the world had a strong growing
season. As a result, prices won’t respond to
the smaller Canadian supplies in the same
way for each market. At the same time,
smaller inventories overall also means
buyers are competing harder for the Ca-
nadian crop that is out there, improving
farmers’ opportunities.
The crops of which Canada is a major
global supplier have shown the strongest
values, particularly pulses and some spe-
cialty crops. In other cases (wheat, durum
and malt barley), our prices have been
higher than what they would be if we had
seen normal yields. However, the upside
is limited by ample supplies elsewhere.
Growers need to understand the market
structure and outlook for each crop in
order to make the best decisions possible.
To further complicate matters, off-grade
grain always takes more work to market,
particularly if one wants to get the max-
imum value for one’s inventory. Usually,
the extra effort to shop around samples
pays off. Some buyers are interested in
particular quality specs rather than the
CGC factors that determine grade. Recent
years have seen tremendous opportunities
to capture much higher values for grain
that gets a lower official grade but still
meets the needs of the end user. This can
be especially true for wheat and durum,
although additional value can also be
extracted in other crops.
The hard part is knowing the needs
of specific end users. This is where cash
grain brokers can be really helpful. They
communicate regularly with a much
wider range of buyers than most growers
can, and know what those buyers are
looking for.
It is always absolutely critical that
accurate samples are taken when shop-
ping around your grain. This is even more
important when dealing with off-grade
inventories.
Finally, it’s not too early to start making
marketing decisions for the 2016 sea-
son. Don’t make the mistake of putting
together a marketing plan based on prices
from the 2015-16 crop year—the dynamics
that drive pricing today can and will look
completely different from what will shape
values next year. That doesn’t mean that
we might not see another year of strong
prices for crops like durum, peas or lentils.
However, one needs to know that next
year is its own story and the price outlook
for each crop will change accordingly.
The implications of a challenging
growing season don’t disappear when the
equipment is finally parked for the winter.
In some ways, the marketing of that crop
only gets harder. But with some diligence
and effort, growers can squeeze as much
value as possible out of what they have.
Jon Driedger is a senior market analyst
with Farmlink Marketing Solutions.
Growers need to understand the
market structure and outlook for
each crop in order to make the best
decisions possible.
HOWTONAVIGATE THEMARKETWITHA SMALLER CROP
Winter
2016
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