By Tom Collins
PORT BURWELL — Ontario grain merchants are encouraging farmers to take advantage of a volatile market and lock in soybean prices now.
Andy Pasztor, who farms at Port Burwell east of St. Thomas, has changed his marketing plan slightly because of the volatile market. Normally he sells about 50 per cent of his corn and soybean crop by the time planting starts, and then keeps the rest for rallies and to see how well his crop does. By the end of April this year, he had sold a little more than 50 per cent of corn and 70 per cent of soybeans.
“The markets go up and down, and you have to make sure you’re locking in the profits,” he said. “You never know what’s going to happen, so you try to get what you can when it’s good.”
At the end of March, China threatened to raise tariffs on American soybeans by 25 per cent if the U.S. and China can’t come to new trade agreements. In the day following that announcement, the price of U.S. soybeans dropped dramatically, but then recovered.
Pasztor said the combination of the uncertainty between China and the U.S. and current high prices is what led to him forward contract more than normal.
That uncertainty should be leading farmers to sell soybeans at a higher price than they may get later this year, said Parrish and Heimbecker merchant Steve Kell.
“If you’re happy with what you can sell grains, especially soybeans, for right now, then there’s no need to find out what happens next,” said Kell, who encouraged farmers to have 50 per cent of their soybean crops sold at this stage. “There’s this enormous risk in front of us, and the best way to manage risk is to simply sell grain or forward contract grain. However it unfolds, at least you’re not on the ride.”
Kell said social media is helping magnify this year’s volatility more so than in past years.
“There have certainly been trade disputes in the past,” he said. “There’s never been a trade dispute amplified by Twitter. What’s really interesting about this one is how much threatening is going on, relative to how much anything is actually being implemented.”
Matthew Pot, a grain market analyst at Hamilton, said the market is just as volatile as ever. It’s just that the political noise is impacting the markets more. It’s only in the past couple of months when the volatility has increased, and before that, the market was boring, he said.
“In these types of markets, you have to sell the stories and don’t wait for the facts,” he said. “Take advantage of the volatility of the higher level and lock in profit. You don’t want to get caught in that position where you were hoping for slightly higher prices, and now you can’t wait out the storm of the lower prices, and you end up panic selling. That’s the problem with a volatile market from a producer standpoint. It can be emotional and hard to take advantage of these situations.”
Chatham-Kent farmer Harry Lawson said he follows Nebraska grain marketing consultant Roy Smith’s philosophy: When the cookies go around the table, you take some.
“So if the market shows you a good price, you sell some,” he said, explaining he’s sold a little more than he normally would, but that was because of high prices, not uncertainty in the market.
Lawson said even if China announces tariffs on American soybeans, “The demand is still there. The Chinese want soybeans, and they have to get them someplace. There’s only two games in town: It’s North America or South America.”