MARKETING IN A VARIABLE QUALITY ENVIRONMENT
RECAPPING A HEAD-SCRATCHER OF A YEAR
BY JONATHON DRIEDGER
This past fall will go down as one of the more challenging harvests in recent memory. Persistent showers, interspersed with heavy rains and even snow, made progress feel like a real grind through much of the Prairies. Unfortunately, this also affected grain quality, with the cereals being impacted most heavily.
In contrast to when problems are more localized, widespread downgrading results in deeper quality discounts and creates greater challenges for buyers in managing blending opportunities and coordinating logistics. This is the case particularly when multiple grading factors are causing issues, which this year included sprouting, fusarium, weak protein, poor hard vitreous kernel ratings and low falling number.
Depending on the specific needs of the end user, some have the ability to blend up or down for any one of the many variables, while others don’t.
The end result is not just wider discounts for quality specs, but also a great deal of price variability among buyers. This creates a very challenging environment within which growers are forced to make selling decisions. But, regardless of the quality of your own grain, there are some important steps you can take in the current market environment to achieve the best price possible for your specific inventory.
First, make sure you take samples that are truly representative of what you are trying to sell so buyers know exactly what you have. It’s frustrating and expensive for both the buyer and the seller when a truck shows up with lower-quality grain than was expected. The best-case scenario in this situation is that the grain can still be unloaded at a reasonable discount. More than likely the penalty will be punitive, or the load may even be rejected entirely.
Second, shop around extensively. Different buyers tap into a variety of end users, all of whom have their own quality specs that are important to their unique needs.
Because of this, premiums and discounts can vary enormously—irrespective of what the posted bid may be for a base grade. Understand which buyers have the ability to blend or have higher tolerances for certain grading factors, and which end users have a threshold below which a load simply gets rejected.
This also means talking to buyers you’ve never considered before. This is where reputable cash grain brokers can be highly effective, as they are plugged into markets that you may not otherwise be aware of and understand the specific needs of each of these buyers.
Farmers should also be very careful in negotiating when they have diverse quality on their own farm. Often, buyers will show an interest in the best samples but are less passionate about the other inventory. Where possible, include the lower-quality grain in your discussion. Otherwise, you run the risk of being stuck with only low-quality grain in the bin and little bargaining power as you try to move it.
Finally, try to find that balance between being patient and taking action when good opportunities are presented. In years of variable quality, the market can take some time to sort itself out in terms of what is out there, who wants it, and where the opportunities exist for traders to arbitrage price spreads and logistics. But, given some time, markets can be highly effective at finding the best home for various grades.
Growers also need to be realistic about what they have. There’s nothing to be gained by holding out for a price that is unlikely to be seen, and then ending the crop year with bins full of low-quality grain. The best opportunities to move off-grade samples may be fleeting, and can quickly disappear if one procrastinates in the hopes of squeezing a bit more out of the market.
In a year like this, growers don’t have much control over the quality of their crop or what the market is willing to pay for it. But you can take steps to get the best value possible for what you have. This requires more hard work than in years when you—and the rest of Western Canada—harvest a crop that is consistent and high quality. But the additional effort could be one of the best investments you make all year.