By Brandy Harrison
KEMPTVILLE — The heyday of high prices is fading and farmers waiting on another ethanol boom will likely have to settle for weather-driven supply spikes and deficits and should start marketing more defensively, said a Campbellford crop farmer and elevator owner.
“The last eight years you’ve been able to pick up the phone and sell grain and make a profit. That’s been an aberration. That’s a departure from normal and we’re not going to see it continue forever,” said Peter Archer, who owns Maizeing Acres Inc. in Campbellford, a 2.3-million-bushel capacity elevator, with his wife Donna.
Zero in on what you can control, Archer told farmers at the Eastern Ontario Crop Conference in Kemptville on Feb. 18. Don’t get tied into knots about the slowdown in China or the weather in South America.
“Those things can, do, and will change. You have to avoid analysis paralysis. Stop over-thinking these things and assuming you know what the markets are going to do.”
Paralysis kicked in last July when rain stateside pushed the corn market to rally 50 cents.
“You would think the phone would be busy but it wasn’t. It was crickets. I called up guys I knew were undersold and you know what I got? ‘Did you see how much rain they got in Ohio, Indiana and into Illinois? That’s two I states!’ A lot of guys could not pull the trigger,” Archer said.
Here are Archer’s five tips for keeping marketing simple.
Forward contract.
Forward contracting manages risk and the sooner the better, said Archer. “Unsold grain after harvest costs you money.”
Years of seasonal trends show opportunities happen early — before planting intentions are known or during spring weather hiccups.
“The market pays a premium for the unknown,” Archer said, advising farmers to aim for profit, not the moon. “The market doesn`t care what your costs are.”
Place target orders.
You can’t often get off the phone with Maizeing Acres without hearing their target order spiel.
Create a target price by taking a yield estimate — crop insurance guarantees are a good start — factoring in cost per acre and a profit goal based on payments and living expenses, Archer said.
“You need to know what you want and not just more,” he said, adding that some farmers have target orders two years out. “You’re taking the emotion out of the decision. It becomes mechanical.”
Sell the carry.
Now that stocks-to-use ratio is above 15 per cent, markets are more stable and selling the carry is a legitimate strategy, Archer said. “In the 90s, this was the heart and soul of marketing corn. You had to learn it to survive.”
If the market has too much corn, it kicks sellers in the butt in the nearby market. The higher prices are further out.
Capitalize on the low dollar.
With grains priced in U.S. dollars, the exchange rate has held up the basis, keeping Ontario farmers in the black. Archer didn’t suggest the dollar would recover, but warned that it traditionally follows oil.
“It won’t go down forever.”
Fight urge to wait.
Borrowing from Farm Credit Canada, Archer advised farmers to stop waiting for perfection or rationalizing and blaming. Farmers need a plan and a realistic goal and shouldn’t assume they know more about the U.S. crop than the market. Bounce ideas off a sounding board and track what works and what doesn’t, he said.
