No matter how closely they watch the skies, farmers can’t control the weather. Nor do they have any influence over the amount of volatility in their markets.
But pricing? Well that, says Irmi Critcher, is one aspect of farming that producers can exercise some control over, and that she works hard at.
“You can put a few extra dollars into your own pocket by doing that marketing yourself,” says Critcher, who grows grains, oilseeds, peas, and grass seeds in the Peace region of British Columbia.
Gunter Jochum, who farms west of Winnipeg in Manitoba’s Red River Valley, sees the value in marketing grain, too.
“If you can grow a crop, that’s great. But if you don’t know how to market a crop, I think your farm is going to be in trouble,” he says.
But how do you learn to market your grain effectively?
Jochum chuckles. “Well, the thing is I don’t know much about marketing yet. I’ve only been farming actively since ’84 and I’m still learning.”
Jochum and his wife Crystal farm along the Assiniboine River. Most of their land is a heavy Osborne clay, and they’re on a “keep it simple mission,” says Jochum, growing soybeans, wheat, canola, and a few oats. The soybeans looked good in this year’s wet weather, he adds.
But marketing changes constantly, says Jochum, and he has to be ready to adapt.
Jochum first learned the ropes from his father, Karl, who emigrated from Germany in 1980.
After earning an ag diploma from the University of Manitoba, Jochum came back to the family farm. One of his first tasks was to market grain. He would talk through decisions with his dad first, and Karl asked the right questions to help him analyze that decision.
Jochum took more hedging courses after university. He was also an active hedger at one time, which turned into speculation, although he doesn’t have a trading account right now.
Speculating is not a good way of making money, he says. He compares it to gambling in Vegas. But true hedging is a very good tool, he says, as long as you can keep the emotions out of it and know your reasons for taking a position in the market.
And being an active hedger “was a very good learning experience,” he says. He learned how much the markets move around. He learned about the forces at play — fundamentals such as weather, crop quality and volume, and speculators who don’t grow crops but still trade it.
Speculators might read something in the news about the upcoming canola crop and buy or sell based on that information.
“Those people influence my grain prices as well,” he says.
Critcher and her husband, Barry, have also been farming for over 30 years, and they’ve seen their share of changes in grain marketing, too. In the past, farmers basically hauled grain to the local elevator and got a price the day they delivered, she says.
“You left the marketing or the buying up to somebody else.”
The end of the Canadian Wheat Board’s single desk signalled big changes in marketing wheat, but the Critchers had started taking charge of their own marketing before that shift. In fact, the Wheat Board also picked up on that trend, offering farmers different marketing options, which the Critchers took advantage of.
“We started comparing prices. We started seeking out new opportunities.”
Critcher also learned through the marketing packages offered by line companies. Farmers could commit a specific tonnage or acreage to the program. The company takes the crop, protects its position with puts and calls, and then the cost of those options comes off the farmer’s final cheque.
Critcher says they’ve opted for this two or three times with different companies over the years. They commit a small percentage of their expected production to see what the company can do for them.
“You don’t know whether you’re doing the best job unless you can compare it to something,” says Critcher, explaining it’s partly about seeing what they can learn from other people.
Critcher learned that the person representing the company was vital to making the service work. It’s about how seriously they take their job, she explains, as well as the farmer’s relationship with that person.
Critcher says she also realized they could do it themselves as long as they paid attention to the markets.
“Their vested interest isn’t necessarily to make you more money. For them, it’s probably to source more grain and have more clients. So you have more vested interested in marketing your own grain than anybody else will have.”
Each morning Barry Critcher gets a market report, which zeroes in on different events around the world. He also checks commodity prices throughout the day, and gives Irmi the playback.
The Critchers also get text messages with market updates up to three times a day, and they periodically check the Alberta Wheat Commission’s Crop Data and Price Reporting website. They also sell feed to dairy producers in the lower mainland, so they keep an eye on feed prices as well.
Critcher says watching global markets and news is also important. Problems with Brazil’s soybean harvest will eventually affect the canola market, she says. Markets react to the USDA report before it even comes out, in anticipation of what the report may contain. And political events, such as the Brexit vote in the U.K., also “filter down into our markets.”
“You have to be able to anticipate a few things and read into things,” she says.
Jochum used to get a lot more market reports via email, but these days he focuses on one daily email. That report tells him about global fundamentals. It’s also big on incremental selling, which is something he does.
If it’s a “wild day,” Jochum checks the markets with his smartphone. But because he aggressively forward-contracts grain, he can go on holidays without worrying about markets.
Jochum doesn’t hedge or speculate these days. Instead, he uses run-ups in prices as opportunities to forward contract with local elevators.
“I never want to be caught in a situation where all of a sudden I have to pay for crop inputs and I have no cash, but I have bins full of grain so now I’m forced to sell something in order to pay for crop inputs,” he says, explaining why he prefers to forward contract grain.
“I like to have empty bins and have the money in the bank.” His ultimate goal is to have his whole crop combined, marketed, and off the farm by November 1, something he came close to achieving last year.
Once Jochum reaches the point where he’s comfortable with how much he’s already sold, he pays less attention to the markets. But if something makes a big move —for example, soybeans in his area topped $13 per bushel this summer — he’ll “open up the vault again and let some more go.”
Both Jochum and Critcher see marketing as a year-round activity. And the Critchers also sell in increments, and like to have some movement during harvest. Usually they have about 30 per cent of their crop contracted before it’s even in the ground.
Critcher says they sell their increments by super-B loads. For example, with canola, they could sell 80-tonne increments, which would take into account dockage, she says.
Markets fluctuate so much that by the time a farmer picks up the phone to make a deal, the price could drop again. To get around this, Critcher prefers to have targets in, rather than trying to pull the trigger when the market hits the price she wants. Once her target hits, the computer picks it up and the company contacts her, she explains.
Usually they put in targets with more than one company, she says. But she cautions that if two people are entering targets, they need to keep track of what the other person is doing. Otherwise they could have several targets hit at once, and end up with more grain contracted than intended.
The Critchers’ son, Michael, returned to the farm from college a few years ago. He’s gearing up to take over the farm, and is getting his feet wet with marketing, too.
One gets the impression that marketing is a job the entire Critcher family enjoys. Irmi Critcher says that when several people are interested in marketing, it’s important to designate one person to make the contracts to avoid confusion. The rest of the team can then feed that person information, she adds.
Beyond online marketing
These days farmers can do much of their grain marketing online. In fact, they don’t even have to be in the country for some of it. But both Critcher and Jochum see relationships with elevators and other buyers as important.
The Critchers are a short haul from Dawson Creek or Fort St. John, B.C. They also sell some grain to Rycroft, Alta., which gives them more options and access to big throughput elevators.
Marketing grain starts with knowing what you have. Critcher says they participate in the Canadian Grain Commission’s Harvest Sample Program, which provides farmers with unofficial grades, and other quality information, for free. And before hauling a load into the elevator, they bring in representative samples to see if they can make a deal. If they can’t, then the Critchers start setting targets for that grain.
Critcher also emphasizes the importance of being honest about what you’ve got to sell. If you have poor-quality grain, tell the elevators that it’s poor quality, and ask what they can do for you, she says. In those cases, farmers need to be “willing to take a little bit of a hit on it because you know they’ll have a job finding a market for it,” she says.
Having a relationship with those elevators is especially important when it’s time to deliver, says Critcher. Contracts may include clauses that outline deductions if the delivery isn’t quite up to the company’s specs. But sometimes the quality can be averaged out over the total tonnage, rather than each load. Or the elevator may take something that’s a little lower quality if the farmer is delivering something that’s higher quality later on. You’ve got to keep those lines of communication open, Critcher says.
There are several line companies and feed mills in Jochum’s area, and they compete aggressively for farmers’ grain. But Jochum still sees relationships with those buyers as vital.
And like any relationship, there has to be a little give and take. He’s not afraid to sign contracts that require delivery during busy seasons, whether that’s seeding, harvest, or even Christmas holidays.
“When they call us for grain, we try to accommodate them every time. And by doing that, you build a relationship.”
Because he’s quite accommodating, he says he feels comfortable walking into the office of any line company to discuss a problem. “It works very well. But it takes a little time to build that trust.”
Ultimately, Jochum doesn’t see marketing as an onerous task. Like most farmers, he is driven by the anticipation of growing and harvesting a crop. But selling that crop is a big part of it, too.
“I love marketing,” he says.