How to sell corps when prices are high   

By Colin Reesor

Try 'drag your feet' marketing.

Exciting times are stressful in the grain farming business. A series of droughts and new demand has turned a surplus market into a shortage. A whole generation has only experienced surplus markets and farmers now don't want to miss out on the current opportunities.

The last big demand led market was in 1972 when the USSR had a short crop and stripped US supplies before the market realized what was happening. Information is much better now but China could still do the same.

We know about the ongoing drought in Australia and the dryness in every other major wheat exporting country. Wheat prices have gone through the roof and few Ontario farmers have any of this year's crops left to sell. The biggest risk to farm prices would be a government export embargo. American President Carter (a peanut farmer) did it back in 1972 and killed the market for years. The Ukraine has suspended exports this year. Europe has reduced import tariffs and set-aside land. The US is talking about releasing land from the Conservation Reserve. Politicians are very aware if their risk from high food prices.

The effects of high grain prices have just started to hit grocery shelves in North America.

Corn and soybeans are having a good run-up in price. Ethanol for fuel has been the driving force in the corn market. There is a major building boom of new ethanol plants and farmers responded by planting a record large corn crop last spring. It wasn't enough.

Soybeans started their price run-up when soybean oil became a viable source of "bio-diesel". Now soy oil prices have risen too high for the economics to work but petroleum prices are moving higher so it is not over yet. It is very dry in the "new lands" in north-western Brazil and the potential for the reduced crop from a major supplier is keeping the soybean price on the move.

So, what to do?

Generally, you do what is called "drag your feet" marketing. In surplus times, forward contract because prices keep going down. During short markets, sell slowly on an "as needs" basis.

Expect massive worldwide planting of wheat this fall and next spring. Given a break in the weather, supplies should increase. 

Prices have not made harvest low this fall and maybe they won't. I wish I had stored wheat, but I didn't. Storing corn for spring looks best for me.

(Former Grain Newsletter editor and retired OMAFRA financial management specialist, farms near Walkerton.)