BY JON DRIEDGER
Headstart
ALTHOUGH SEEDING IS STILL A
month or two away, it’s not too early
to start thinking about your marketing
plan for 2016. In fact, growers should be
doing more than thinking about new crop
sales—they should have most of their
selling plans laid out in great detail if they
want to maximize the value of the crop
they will be growing this summer.
Inevitably, the worst sales of the year
are ones that are made in haste and in
response to an immediate need that could
have been anticipated earlier. Many grow-
ers already know this and start making
new crop sales ahead of time. However,
in some cases the planning around these
sales doesn’t go deep enough. The decision
to sell or not begins and ends with a best
guess as to whether or not prices will
increase or decrease, with perhaps a nod
to whether it appears profitable. Often,
sales are also done in an ad hoc manner,
maybe in response to a buyer calling with
a “special” that is only available for “limit-
ed tonnes.”
Aside from a significant reduction of
stress, there are several reasons why it’s
advisable to have a detailed marketing
plan laid out well in advance. First, it’s
impossible to know if you are making the
right selling decision for your farm if it’s
not done within the context of predeter-
mined profit targets and a detailed map
for the coming crop year. This goes for
each sale made for each crop.
As part of this process, producers must
be able to answer the following questions:
• Does my idea of “profitable” truly reflect
all of my costs? What is my cost of
production by crop?
• How much grain do I need to move at
harvest to meet cash flow and storage
needs? What about other windows of
the year when cash is needed?
• Which crops on my farm have the most
potential upside at today’s price? Which
have less upside and/or more downside?
Are there seasonal price patterns for
any of these crops? Is this based on a
well-researched opinion?
• What is my risk tolerance? Is this due to
my personality and management style,
or is it due to debt levels, tight cash
flows or other circumstances?
• Can I get an act-of-God clause for
contracts on any of the crops on my
farm? If so, does that mean I can only
lock in a lower price? Is that the right
trade-off?
• Which crops do I need to be more
cautious about forward selling due to
grade risk? How does that impact sales
decisions for other crops?
Only once all these variables are known
can a producer make a good decision
when faced with questions such as: How
aggressively do I sell new crop peas?
Should I plant CPS wheat over CWRS?
Should I lock in a basis for canola or the
flat price, or perhaps neither? Should I
consider a crop that I haven’t grown before
if it’s more profitable for my farm? Should
I lock in the higher new crop price for
wheat in the later delivery window or take
the lower price for fall delivery?
It takes time and focus to put together
a good marketing plan, and it’s very diffi-
cult to do once spring hits since there are
few breaks between seeding and harvest.
It is hard enough to stay on top of adjust-
ments that might be needed in response
to changing markets, crop conditions on
your farm or other factors, never mind
trying to build the plan from scratch. If
it’s not in place by the time you hit the
field, it’s probably not going to happen,
and every selling decision going forward
will be made without a plan to evaluate
its merits.
Producers also need some flexibility in
their plan—markets are dynamic and can
change quickly, and on-farm needs will
shift as the season unfolds. That said, it’s
much easier to adjust a marketing plan
than to respond to a changing market
without that roadmap in place. When it
comes to a new crop marketing plan, it’s
impossible to start too early.
Jon Driedger is a senior market analyst
with FarmLink Marketing Solutions.
HAVENEWCROPMARKETINGPLAN FIRMLY INPLACE PRIOR TOSEEDING
Spring
2016
grainswest.com
19
MARKET
MONITOR
