Grain marketing specialist Howie Mercer gave a speech on challenges and opportunities southeast Saskatchewan is to face in the upcoming season.
Truly passionate about grain farming, Mercer himself grew up on a farm and later dedicated over 15 years of his life to exploring challenges in marketing grain.
Talking to guests at the Estevan Farmers’ Appreciation Evening March 26, Mercer through a tic-tac-toe-like game explained the main strong and weak points in contemporary grain marketing.
“Today I want to talk about grain markets. I’m typically a very positive person, but unfortunately, I do have to talk about some of the elephants in the room,” said Mercer.
Mercer’s presentation demonstrated a 50/50 split between positive and negative tendencies.
He noted that over the time period from 1950-2012 such commodities as wheat and corn went down in price 75 per cent. Through that time producers started growing more and more acres of grain trying to make things work and eventually meeting the demand.
“Unfortunately markets don’t care about your farm… The market is driven by supply and demand, and if there is lots of it, it’s whoever lets it go first that sets that price,” Mercer noted.
He pointed out that on any farm it is important to understand risk management, cash flow needs and management styles. It’s equally important to understand the personal bottom line and what price works for a particular farm, because the market is not always going to take care of producers, producers have to take care of themselves.
“Today there are still opportunities for you to market your grain at decent prices out there. But the market opportunities are fewer, and they are further between, and they don’t last very long. I’m noticing a lot of times three to four hours for a really good opportunity,” Mercer said.
He outlined that strategy to wait a bit that could result in better prices during the past few years doesn’t work anymore.
“In markets like this you can’t be a procrastinator or you missed out,” Mercer noted.
He encouraged farmers to do their homework, figure out what their needs are and be ready to take advantage of the opportunity windows when they come.
With the global demand for a number of crops met, Mercer underlined that the world still needs the farmers to maintain the volumes that are grown now, and in this case, weather threats in different areas should be viewed as opportunities in other places. He also recommended keeping new crops in mind.
“New crops – secure margin, today maybe there is not the opportunities, but (they may become opportunities when) some of the possible weather threats ... come. Understand your cost of production and hit them (opportunities) when you can. This is the type of marketing environment that we are in, and you need to take advantage of it to secure your cash flow and not put yourself in bad positions,” Mercer said.
He also pointed out that it is vital for all producers to learn more about hedging, understand their break-even yield numbers and find crops that would be the best to manage the risks in each case.
“It’s actually more probable to break even on things that maybe are more expensive to grow than it is on cheaper things. You have to understand where your break-even yield is and it’s actually easier to attain that yield than it is on the cheaper crops because the price of those cheaper crops is just so poor,” Mercer said.
Mercer ended with a piece of advice on the three best ways to make a decision.
“Have a forecast from somebody whose repute hold you trust; constraints, look at what those are, like your cash issues and our logistical issues; and then understand your risk management, where you can’t afford to lose money or you can afford to not have money. And right in between all three of looking at them your most optimal decisions are made.”
