It’s no secret that there was still 2023 crop on-farm at the end of July. Some of that old crop won’t have moved even as the calendar flips to September.
I’m not sure that this is uncommon during cycles where the market is in decline over an extended period. For three years prior, the best strategy was to grow and hold, which has been turned upside down on the 2023 crop and possibly the 2024 crop. Of course this marketing regret is in hindsight, but it is important to look at how the amount of 2023 crop you are still holding is impacting the financial outlook for the farm as 2024 harvest is underway.
In July 2024, RealAgristudies asked farmers about the amount of 2023 crop still on the farm and the pace at which sales in 2024 are being made (more on this in the future).
In the figure above we see that 52 per cent of farms in Canada have no 2023 crop on farm, while 28 per cent have one to 10 per cent still left on farm as of the end of July. This leaves 21 per cent of farms with over 11 per cent of their 2023 crop still on farm.
Of course we do not know what per cent of the overall volume of the 2023 crop that the 21 per cent of farms represents. What we do know is that this 2023 unsold inventory is worth a substantially less amount of value per bushel or metric tonne than it did at harvest. More on the relationship of farm size and 2023 carry over below.
We do know that the western Canadian farmers are holding more 2023 inventory as of the end of July 2024 but that is also reflected in more capabilities with more on farm storage to allow the marketing flexibility in comparison to the eastern Canadian farmer. Sixty seven percent of Eastern farmers have zero inventory while 41 per cent of western farmers do. The difference between the two regions is also in the one to 10 per cent of inventory range of carryover with the west being thirty six percent and the east at 17 per cent of farms.
Some other takeaways:
- The larger the farm, the more likely you are to have carryover 2023 crop. This is also a reality of access to infrastructure for the larger farms and potentially geography. Twenty percent of farmers over 5 million in revenue have 21 to 30 per cent of their 2023 crop on farm while smaller farms are less than 10 per cent in that category.
- The older the farmer, the more likely you have no carryover 2023 inventory, but the older the farmer the more likely you have over 11 per cent of your 2023 crop.
Now that we have dug into who is holding inventory, how does that impact the outlook or attitudes in the countryside? How much 2023 crop you still have on hand seems to have little impact on how you feel about current farm financial performance; however, it does show some itself when we dig into future farm financial performance. And the fascinating takeaway is that the more 2023 inventory you have on farm, the more likely you are to feel better about your future financial performance. BOOM!
For most people this is counter-intuitive because of the market decline which impacts any market priced balance sheet. So what is driving this belief for farmers with carry over inventory that their financial situation twelve months from now will be better than today?
Although more people with 2023 inventory feel the market is headed higher, it is not substantial. In fact 49 per cent of farmers that believe the market is headed higher have zero inventory, while 53 per cent that believe it’s headed lower have zero inventory. The same close relationship exists for farmers with one to 10 per cent of their 2023 crop in terms of market direction and this trend is steady throughout the carryover amounts.
There are differences when we look at confidence in marketing grain and 2023 crop on farm, although slight. If you are extremely confident in your marketing plan, twenty four percent of those have over 11 per cent of their 2023 crop. In comparison if you are not all confident in your marketing plan, eighteen percent of those farmers have over 11 per cent of their 2023 inventory still on farm.
In any production season, when to market your production is not a simple decision. How we evaluate that decision and what drives us to move crop can be a very personal one as farms are not a homogenous unit. There is cash flow, storage capacity, quality of crop and other factors driving the decision for each farmer. What we have seen here in this data is that even though the commodity market has dropped considerably in the last 12 months that has not impacted the current farm financial outlook but has impacted the future financial outlook of the farmer in a different manner than one would expect at first glance.
I really appreciate you, the farmers, who complete our RealAgristudies surveys as it allows us to shed greater perspective on what farmers really think. If you have any questions, comments or takes on what we have discussed today, please email me at [email protected].
