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By JONATHON DRIEDGER
MARKET
MONITOR
Marketing inavariablequality
environment
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. Unfortu-
nately, 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 vitre-
ous 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 pos-
sible 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. Differ-
ent 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.
Jon Driedger is a senior market analyst
with Farmlink Marketing Solutions.
Winter
2015
grainswest.com
21
Recappingahead-scratcherof a year