"Contract squeeze worries farmers " is the WP headline

[Blaithin]

You need to take a marketing course Blaithin.

Probably. But it’s not like I really use it anywhere. It would broaden my conversation ability but really, marketing is dull to me and the conversations are usually tense and pessimistic. I’d much rather learn and talk about cows 😂

[jazz]

I am having a tough time drumming up sympathy for the aggressive forward contractors. Somebody has to explain to me the benefits of doing that?

The price is almost never higher in the fall vs the spring. Bills to pay? You can get a million dollar cash advance from CCGA and FCC and big banks have programs as well. My input line at Nutrien isnt due until Feb 15, so theres no rush in that program. Limited delivery space? I dont see any terminals lined up any more, they can move everyone through at reasonable pace especially if you sell more into the spring time frame. Storage? Well bags still work and I think storage is one of the best investments you can make anyway.

The forward contracting appears to be the reason guys dumped cheap crop last yr before the winter run. So a double whammy.

[sumdumguy]

Every second year or so we saw a, “Whammie Year” in the eighties. And every time some marketing outfits went under because they couldn’t fulfill their pre-sale commitments. But some guys (hoarders) made money because stowed away in their many small bins was not only next years seed but a few thousand bushels of flax, canary or low-grade wheat.They cleaned out those bins when the prices spiked. Good things come to those who wait - sometimes.

[farmboy44]

Apples and oranges....fertilizer is still being made in a drought , rain snow cold hot etc

...the only pricing mechanism is what they can get away with...

Pick another anology

The commodity isn’t the comparison. It’s the contract.

Apples to apples his analogy is absolutely valid.

[Hamloc]

Very interesting thread.

Favourite quote so far “The silent majority of us don’t want to see the rest of us fund some bailout for others unfavourable decisions.” Well said.

One other well made point was that Agristability was designed to benefit accountants not farmers, for the most part this is true.

As far as the contract a farmer signs when you forward contract grain, how many on here have read them? I have to admit I have only fully read one. There was more than one interesting clause but the one that sticks out in my mind and I am paraphrasing from memory, if a producer is unable to fully deliver on the contract the grain company is entitled to the returns from the producers crop insurance. Now that was not how it was written but the fact of the matter is they are legally entitled once you sign the contract to go after your crop insurance if you don’t have the grain or the money.

There is no doubt that favourable barley prices off the combine enticed farmers to forward contract too much barley. Also no doubt that in my area at least barley certainly getting hit hard by the drought. Not really sure what the answer is. As a grain company you will look bad if farmers go bankrupt because you had them fulfill their legal obligations and in reality it is not their fault, the farmer signed on the dotted line. As for the government bailing out those farmers who over committed, not really fair to those that didn’t. One hell of a mess all around.

[jazz]

Every second year or so we saw a, “Whammie Year” in the eighties. And every time some marketing outfits went under because they couldn’t fulfill their pre-sale commitments. But some guys (hoarders) made money because stowed away in their many small bins was not only next years seed but a few thousand bushels of flax, canary or low-grade wheat.They cleaned out those bins when the prices spiked. Good things come to those who wait - sometimes.

Sum, I have a couple old school neighbors who dont move their production until a couple months before the new crop is coming off. Yes storage can be a hassle sometimes especially with oilseeds.

Thinking about fleabeetle with all that stored crop. Guy is going to absolutely kill it if he unloads it all.

[bucket]

The commodity isn’t the comparison. It’s the contract.

Apples to apples his analogy is absolutely valid.

Yes right...got off track ...I agree..farmers signed those contracts.

Say higher priced fertilizer for next year and I get sidetracked.



This may set a bad precedent ...what if farmers sign 2022 contracts for high prices , have a bumper crop and graincos ask governments for a reprieve when prices fall to normal levels.?

[ajl]

Forward contracting now looks very bad but do keep in mind that the oil companies that hedged oil prices stayed alive during the oil crash. Their production is less weather dependent of course. Another factor is that part of the problem is due to governments and central bankers made a bad short term policy decision (as they always do) and used hyperinflation to keep from covid related defaults as well. These defaults are still coming. Had interest rates risen due to a sudden new demand for debt, as they would have in a free market environment, the nominal price rise of canola would be much more muted. During the deflationary period from 2018-2020, $12 canola was locking good for harvest delivery. I did book some and have bought some out already, but now that we got an inch of rain after a 5 to 6 week dry spell, will likely have bushels to cover. Also did have reserve moisture as canola is growing in areas that were a lake last year.

[dmlfarmer]

Apples and oranges....fertilizer is still being made in a drought , rain snow cold hot etc

...the only pricing mechanism is what they can get away with...

Pick another anology

There are other reasons for supply shortages other than drought or weather. Fire at a major storage facility, strike by employees, strike by railroads moving fertilizer, natural gas shortage at manufacturing plant, loss of a boatload of phosphate etc. Some of these out of control of the supplier. Do you think the automotive industry that is hamstrung by the chip shortage foreseen this happening on this big of scale.

You are right that there is no one or way we can pass on our costs hence we have to be even more conscious or risk and use appropriate risk management statagies

[farmboy44]

Yes right...got off track ...I agree..farmers signed those contracts.

Say higher priced fertilizer for next year and I get sidetracked.



This may set a bad precedent ...what if farmers sign 2022 contracts for high prices , have a bumper crop and graincos ask governments for a reprieve when prices fall to normal levels.?

Bingo