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BY JON DRIEDGER
Suboptimal salvage
THERE’S NO MAGIC WAND THAT
can spin lower-quality grain into gold,
but you can make the most of a difficult
situation by putting in the legwork of
taking samples, expanding the network
of buyers that you talk to and being open
to creative marketing options.
Every marketing action (or inaction)
involves a decision around the trade-off
in risks. Hold off on selling? Maybe the
market goes lower. Make a sale? There
is the risk of the market moving higher,
potentially leaving money on the table.
Hedging in the futures market eliminates
the overall price risk, but still leaves the
potential for basis levels to weaken or to
miss out on physical delivery opportuni-
ties in a needed window.
Another critical risk trade-off takes
place when growers make forward sales
ahead of harvest. You exchange price risk
for yield and quality risk until the crop is
safely in the bin. However, if prices are
attractive, then this is often a trade-
off well worth making, particularly
if you don’t sell more aggressively
than you are comfortable with.
Fortunately, quality concerns
weren’t a big problem on the Prai-
ries this past season, but a quick look
back to last year’s harvest reminds
us that this can be a huge challenge. If
you do end up harvesting a lower-quality
crop and your crop isn’t already commit-
ted, you can partially salvage suboptimal
quality by doing a bit of leg work.
First, know exactly what it is that is
causing the downgrading. Take rep-
resentative samples of your invento-
ries—right down to the individual bin if
necessary—and get them graded by an
independent third party. Buyers will be
more willing to work with you if they
understand exactly what they are dealing
with. In some cases, end users are look-
ing for and willing to pay up on specific
traits that are outside of the general
Canadian grades but fit their specific
needs. In other words, one No. 3 Canada
Western Red Spring isn’t the same as the
next to many buyers.
Second, shop your samples around
widely, including to buyers that you don’t
normally do business with. There are
some companies that specifically deal
with off-grade inventories. The supply
chains that these companies service may
be better able to work with lower-
quality grain than others. This could
allow them to offer you a better price
than an elevator that would be less
efficient at working with the quality and
traits that you have.
Cash grain brokers can be valuable
as well. They deal with a wide range of
buyers—ones that you may not think of
contacting yourself—and know exactly
what their individual needs are. They are
tuned in to which companies are looking
for various qualities, and are also aware
when someone may be caught a bit
short. This can result in a slightly better
price, but is more likely to provide an
opportunity to find a home for off-grade
grain that might otherwise be difficult
to move.
If your grain was committed to a buyer
for a higher grade, the options are more
limited. The first step is to understand
exactly what your choices are. What is
the discount that you would receive?
How does that compare to what other
buyers would pay for that same sample?
Do you have other grain on your farm
that the buyer is interested in, and is the
buyer open to co-operating on a “fair”
price for your lower-quality contracted
grain if you provide other grain as well?
Is there a blending opportunity? Do you
have the option of buying in grain to
fill your contract? Is this economically
viable? Some buyers may be more
co-operative than others, but the ques-
tions need to be asked if you want to
make an informed decision.
Jon Driedger is a senior market analyst
with FarmLink Marketing Solutions.
DON’T LETOFF-GRADEGRAIN LEAVE YOUHANDCUFFED
MARKET
MONITOR
Spring
2018
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