As the transition towards an open market
system evolves, we’ve been hearing the
comment more frequently about what a big
deal it is that wheat will now be a
‘cash crop’. Indeed, being able to
generate cash flow on demand from wheat
will greatly improve individual
producers’ ability to make good,
successful grain marketing decisions.
In the fall, many producers have often
been forced to sell non-Board grains in
order to generate cash to pay the bills,
or because they’ve run out of bin space
and there’s only been a 25% contract
call on wheat. Being forced to sell
crops when the market is signalling not
to comes with a cost. That cost is equal
to the price the farmer gets when they
are forced to move it, compared to the
higher price that comes available
afterwards.
It’s impossible to know exactly what
price might have been achieved if the
farm hadn’t been forced to sell at an
inopportune time. Saying that fall is an
inopportune time to sell further assumes
that one’s forecast for the non-Board
market to rise post-harvest was
accurate.
Much of the fear that farm prices will
end up in the bottom end of the range
without the CWB and mandatory pooling is
unfounded. Market analysis works, and
farmers have been investing in effective
market research and opinions about
future price direction for years. Even
in wheat in recent years, forecasting
price direction is the way farmers made
decisions about whether to choose the
CWB’s cash price (Fixed Price Contract)
on a particular day, or to wait.
They don’t always post the lows of the
year in September, but canola, peas,
oats and other non-Board markets do face
seasonal price pressure in the fall. The
vast majority of distress-type sales end
up happening in the post-harvest period,
sometimes due to the inability to move
more wheat. Allowing crops to move off
farms to market in this way is weak.
Better prices are achieved by farms that
hold their crop in strong hands.
‘Strong hands’ is a grain industry term
that refers to the skill of buying and
selling at the most opportune times.
Through contact with other buyers and
sellers, traders maintain a sense of how
badly the market wants to own or get rid
of grain stocks at any particular time,
and responds by either offering or
holding back their own market interest
accordingly.
To develop ‘strong hands’ will involve
monitoring and sensing market tone on an
ongoing basis, which will be new to some
producers. But in all cases, it starts
with removing restrictions from
positioning the farm to sell according
to market signals post-harvest. Next
year, Prairie farms’ ability to get to
this position will be greatly
facilitated by the ability to use wheat
as a cash crop.
www.farmlinksolutions.ca
system evolves, we’ve been hearing the
comment more frequently about what a big
deal it is that wheat will now be a
‘cash crop’. Indeed, being able to
generate cash flow on demand from wheat
will greatly improve individual
producers’ ability to make good,
successful grain marketing decisions.
In the fall, many producers have often
been forced to sell non-Board grains in
order to generate cash to pay the bills,
or because they’ve run out of bin space
and there’s only been a 25% contract
call on wheat. Being forced to sell
crops when the market is signalling not
to comes with a cost. That cost is equal
to the price the farmer gets when they
are forced to move it, compared to the
higher price that comes available
afterwards.
It’s impossible to know exactly what
price might have been achieved if the
farm hadn’t been forced to sell at an
inopportune time. Saying that fall is an
inopportune time to sell further assumes
that one’s forecast for the non-Board
market to rise post-harvest was
accurate.
Much of the fear that farm prices will
end up in the bottom end of the range
without the CWB and mandatory pooling is
unfounded. Market analysis works, and
farmers have been investing in effective
market research and opinions about
future price direction for years. Even
in wheat in recent years, forecasting
price direction is the way farmers made
decisions about whether to choose the
CWB’s cash price (Fixed Price Contract)
on a particular day, or to wait.
They don’t always post the lows of the
year in September, but canola, peas,
oats and other non-Board markets do face
seasonal price pressure in the fall. The
vast majority of distress-type sales end
up happening in the post-harvest period,
sometimes due to the inability to move
more wheat. Allowing crops to move off
farms to market in this way is weak.
Better prices are achieved by farms that
hold their crop in strong hands.
‘Strong hands’ is a grain industry term
that refers to the skill of buying and
selling at the most opportune times.
Through contact with other buyers and
sellers, traders maintain a sense of how
badly the market wants to own or get rid
of grain stocks at any particular time,
and responds by either offering or
holding back their own market interest
accordingly.
To develop ‘strong hands’ will involve
monitoring and sensing market tone on an
ongoing basis, which will be new to some
producers. But in all cases, it starts
with removing restrictions from
positioning the farm to sell according
to market signals post-harvest. Next
year, Prairie farms’ ability to get to
this position will be greatly
facilitated by the ability to use wheat
as a cash crop.
www.farmlinksolutions.ca
Comment