By Scott Shiels
As spring seeding descends upon us, the world we live in continues to exist in a state of uncertainty surrounding issues such as tariffs and trade agreements, both of which strongly affect grain markets and marketing strategies. Through the late winter and into the spring, producers were faced with very unstable markets due to the on-again/off-again sweeping import tariffs announced by the U.S., as well as extremely large tariffs placed on canola and peas by China. These tariffs led to extreme market volatility throughout the spring, which caused producers to question seeding intentions in an effort to mitigate the price damage caused by the tariffs.
Marketing in this kind of environment definitely has its challenges. Manoeuvring your way through contracts that may or may not have provisions for situations like import or export levies can be one of those challenges. I know that at least in the oat industry, the verbiage on contract terms and conditions varies from company to company, with some buyers having clauses that would place the liability for any tariffs on their customers. The long and short of it: make sure you clarify these potential hurdles while making your deals, and ensure the terms and conditions for the contracts you sign don’t contain any clauses to the contrary.
As it sits today, there are not a lot of crops putting black ink on the bottom line, at least not at today’s prices and with average yields. So how does one plan for the upcoming year with not a lot of crops giving optimistic outlooks?
Well, hopefully you have some of your anticipated production hedged from months ago. New crop pricing traditionally comes out in late October or early November, and this year those prices were pretty aggressive, especially the $15 canola and $5 oats. Forward pricing a percentage of your production and locking in a profitable number on that portion gives you flexibility going forward, and reduces the pressure that comes at this time of year. More often than not, unless the crop just planted is off to a bad start, the market is lower in the summer months than throughout the winter.
The other risk is even worse, and that is taking the chance there will be space and opportunities for moving your grain in the summer months. When markets are tight and prices are strong after seeding, most buyers are just pushing to get their needs met and will pull bids completely once their demand fills, leaving producers with stocks on the farm that they cannot move. In the event of a good crop coming in the field, this can leave you in a precarious position for bin space, and more importantly, possibly having to sell at the often lower summer price.
While we are all rooting for some stability in the ag marketplace, the reality is this instability may become the norm for the next while. I wish I could say that changes in the government, both on our side of the border and south, would stabilize things, but that just doesn’t seem to be the case today. Producers, and industry players alike, will need to lean on each other to forge the best path through these tougher times. Remember, we are all in this together!
Until next time…
