The Early Bird Got a Rotten Worm

[lakenheath]

Forward pricing grain has cost producers money this year. The usual advice is to lock in some profitable prices when they’re available. I had a couple loads of peas locked in early at $5 a bushel that I now regret. It seemed like a great price at the time. It doesn’t look so good now with peas at $7 a bushel.

The same situations exist south of the border. Tom Mick, president of the Washington Wheat Commission, is quoted by Associated Press as saying many farmers sold their wheat before the recent price surge, sometimes against their will when bankers called in loans. Much of the wheat, says Mick, sold for less than $5 a bushel, which seemed reasonable after prices had hovered around $3.50 to $4 a bushel for several years.

Jim Peterson, marketing director for the North Dakota Wheat Commission was quoted by Farm & Ranch Guide as saying some producers are getting $10 a bushel for their durum, but that’s rare because so many took advantage of the good prices at $7 a bushel. This year the market has certainly rewarded producers who were patient and didn’t price too soon.

As producers look to price the balance of their 2007 crop and as they look ahead to forward pricing opportunities for ’08, it’s difficult to come up with a strategy, because you can also lose by waiting too long. I’m Kevin Hursh.

You have to wonder how farmers, on average, perform in an open market. Some of those producers may have done better through a board type approach.

Food for thought anyways.

[Burbert]

Couldn't agree more. Guys forward pricing has cost them big time this year. A lot forced to due so, because of, bills coming due on Oct 30th. The industry counts on this forced selling, each and every year. Some say, forward price, and take a profit, any profit, even a tiny profit, you won't go broke. Good idea, however, you may end up hating yourself afterwards, should things take off like this year. These same marketeers also tell us that you can make money, lots of money in falling markets, when prices are dropping/depressed however they won't tell you how to do it. They want to be paid for that info, and to think these duds are gov't employees gag specialists that want pay on the side, to relate the magic formulation to framers!

[charliep]

This is a good question for the current year. My observation is that a year like the current one will catch farmers who follow a reasonably disciplined marketing plan. If you want to take a 10 year perspective, farmers who base decisions on other issues than straight price outlook (which will catch you) are better able to grow their businesses. These decisions include cash flow needs, profitability, where offered prices are relative to history, etc.

Thes decisions also have to be tied to the ability to take risk. A farmer with 100 % equity/uses cash to buy inputs in the spring/owns their land is in a lot different situation than a farmer with higher debt (bills and loans have to be paid) and rents the majority of their land.

It is also a good opportunity to talk about the other marketing tools available to farmers. It may be the education is owning some way of the money calls for the chance (not guarantee) of higher prices is a good investment. Everyone has to make this decision on their (one size does not fit all).

Will note the CWB also forward sells grain (the adjustment factor on the fixed contracts is a reminder of this). The question comes to whether individual managers should make this decision or whether an organization like the CWB should make this decision for everyone.

[cottonpicken]

Plus looking yourself in the mirror and saying "i really dont know anything about the markets" is also a valuable tool.

Dont worry though, your not alone.

[Digger]

I have to disagree with you LH. The hard part IMHO is to have product left to sell (and be willing to sell) with these values at current histroic highs. The current market environment leaves producers as the ones facing the most risk.· I have heard a lot of “This rally will last forever, never end and/or this
time it is different.” 100 years of commodity marketing history dictates that this time is not different. We just have a different set of circumstances driving the market today!
We need to embrace higher prices, not become paralyzed by them. How much price risk are you willing to take on for the balance of your 2007 crop? 2008 crop?

[northfarmer]

i have had some crop forward sold at prices that have now been surpassed, but they were good prices and made profits for my farm....I doubt some board, like our beloved cwb, could have done any better, but at least I can hold myslf accoutable for the decisions I make, like most other business people do......the wheat i have priced at the peaks of the MGE on ther DPC's i had a couple of weeks ago looks pretty good right now compared to the PRO's, never mind these cash pricing options are a poor comparison to where the market really was at that time globally....marketing and selling your crops are as important as growing it, and those that would chose to leave those decisions up to some beuracrats and others with no ownership are more than welcome to do so on a voluntary basis, IMHO...

[GrowTeff]

A progresive farmer will forward price when he know he has a good price and profit.
The CWB will forward price with no concern for my profit or loss
If you want proof...REMEMBER THE MALSTERS SCREAMING FOR COMPENSATION IN LIGHT OF A POTENTIAL OPEN MARKET...The CWB obviously sold malt Barley to get movement not profit...Hmm who benifets from that? Not the farmer!
Come on CWB show us your sales record. HHAAHAHA they dare not

Larry Webber for Head commisioner of the CGC

[TOM4CWB]

LakenHeath,

Please explain how the CWB did any better than growers... on pre-pricing... other than the CWB was selling something they had no right to sell... because they didn't own the grain(or grow it) in the first place!

Certainly I will take responsibility for my decisions... if the CWB will be accountable for the decisions they make.

The only free riders in our system... are those who took us to the cleaners and bought the CWB grain... that they stole from us! It was wrong. The CWB should pay the price for taking our grain at far below market value.

The ABB just closed the barley pool down under. Here is what my newsletter "Callum Downs" Oct 9 07 says:

"The first pool indicator came out a couple of weeks ago
when ABB released their Select Pool with pool indicators of
$437 and $427/t for malt and feed respectively. That pool
was closed last night, and a new No. 2 pool opened. This
new pool has indicators of $390 and $370/t for Malt and
Feed respectively."

This was done in the new de-regulated Aussie dual market.

This is the situation that "single minded" supporters said was not possible.

Pools can work...

and work well...

IF PROPERTY RIGHTS are respected!

I would say in this case... "The Rotten Bird [the CWB is spoiled Rotten]got the worm."

[craig]

Burbert
You obviously have know concept of forward selling. Time buys you the opportunity to forward sell at profitable values.If you have bills to pay far better pricing ahead instead of waiting for the market to bottom due to harvest pressure. Poor strategy to use this year as a basis for a yearly market plan. I try and make a habit of pricing my fall sales ahead of time which gives me the cash flow I need. If you missed on this years great prices there is an opportunity to lock in attractive values for 2008 and 2009. The wrong strategy is to sit on your hands and do nothing just becasue it din't work this year.

[TOM4CWB]

Craig,

Marketing 101... enough must be sold... to create demand... to nudge prices up more through demand!

A Customer needs a continuous supply of produce. If I don't like the price... If I KNOW it is going to rise (with high probability)... I need to dedicate my produce and speculate using a risk management tool like Call Options.

It is fool hardy to look back... and complain about "could have been" prices... when I knew full well the price had a good possibility of rising substantially.

I didn't doubt CP had a point... over the last few years volatility has been the rule in markets!

We have discussed here often the issue of hedging... and the cold hard facts are...

Cash pricers average as well or better than forward price hedge market managers.

The hedger takes the peaks and valleys out of the cash flow... cash pricers have a much more volatiles cash flow... if they can afford this... they are usually better off.

Safety Nets make the cash pricer the winner!

Select purchase of Marketing options... like a Call option in concert with a hedge program... CAN give the best result... IF a disciplined market plan is followed.

Volatile markets create real opportunity... much better a higher price to sell our remaining Canola today... than the $100/t less it was likely to have been from all appearances last fall at this time... with a par CDN$ and big bean crop!

Options ARE expensive... you can only win with them IF they are purchased selectively!

[Burbert]

craig, You sell your grain (Forward Price It), and I'll sell mine, HOWEVER, WHENEVER, WHEREEVER, TO WHOMEVER I DECIDE!
If you got suckered and sold cheap, this year, good on you, enjoy the accomplishment. But please don't attempt to get/force/persuade/demand/ that others do the same. Forward pricing is not always a good thing. There are no market concepts that work all the time. Go ahead, sell and make a tiny profit, you won't go broke, or will you? I know you marketeers hate it, but and its a big butt, LUCK also plays a role in framing. Do you disagree or not? Listen to the AB Gag people all the time, and guess what, you'll likely end up framing ostriches!!!!!!!

[charliep]

I am sorry that you lost money framing ostriches based on someone from Alberta Agricultures advice. Is this the advice in using ostriches for pictures frames and in framing houses?

[just_wondering]

Burburt are you arguing for monopoly sellers or against? I can't tell in the way you made that last post?

Take another hit and breath deeply it'll calm you down then post!
But then again I should take my own advice and not bother telling someone else how to run their own life. Maybe you should do the same

oops there I go again telling others what to do.

[TOM4CWB]

Burbert;

In my vocabulary... there is no such thing as "Luck".

Hard work, close attention to detail... care and respect for those around us... are all big and important ingredients in prosperity and success.

Ever know of one person... who could take one bushel of wheat... one gold brick... one car... any any other earthly object with them after they die?

How we live... respect others and let them live in peace... this is what is important! This is what built Canada!

What we get for our grain is important... but even more important ... is the blessings and prosperity it brings to our families, communities... and Country!

[craig]

Burbert
This is likely the only time we will agree. I also would like the opportunity to sell my grain whenever, wherever and to whom I choose. It is not my role to force or demand anyone to follow my marketing strategy. Oh yes because the weather was unstable in my area the whole year, I chose not to forward price the majority of my crop. I guess that was the lucky part.