When it comes to marketing grain crops, we all seem to have different strategies, and there isn’t necessarily one ‘correct’ answer.
In the late 2020 oilseeds market, we are seeing highs that haven’t been experienced in years. And the prices just keep climbing. Those that sold weeks ago at what they thought were the highs, are now kicking themselves for not waiting.
In other situations, such as the red lentil market, November saw numbers reaching the 32 cent mark, and it very quickly dropped back down. The pulse market seems to not give us much warning, and as Neil Townsend of FarmLink Marketing Solutions notes, extreme changes can happen overnight.
“The pulse market doesn’t do a great job at forward projecting what we might need. It just seems to be that one day you wake up and that bull market is totally over, or the bear market is totally over, and that’s why there’s a lot of bins in Western Canada that have been filled up with different pulses for several years at a time, sometimes,” he says.
As we approach 2021, many producers are beginning to start thinking about new crop prices. In such a volatile market, it truly begs the question: at what point do you lock in some of these prices, and at what point do you wait? The key, says Townsend, is to pay attention to your farms return on investment (ROI).
“I would say the most important point is for the first 30 per cent of your expected production in 2021 for all crops, is that it’s going to be very important to ROI it at good ratios. I think that one thing you could look at is that — yes, maybe 26 cents isn’t like 30 cents for red lentils, but it sure is better than 18 cents, and it also ROI’s quite nicely,” Townsend explains.
Townsend also acknowledges that one of the greatest risk management tools that western Canadian farmers have in their back pocket is rotation.
“You should generally stick to your rotation. I would say it would be worth protecting that first 20 or 30 per cent, and just locking it in at an ROI that’s positive,” he explains. “I don’t think there’s a huge probability, but there’s definitely a probability that 2021/2022 will be a year where prices will be in significant inverse to what we have (now). Every farmer, all over the globe, is getting incentivized to be a good farmer in 2021. Farmers know what prices are, and they are going to be trying to hit it out of the park next year on yield.”