Farmers should take profitable prices when they appear rather than hold out for the top of the market, David Drozd, founder of the grain marketing advisory firm AgChieve, told producers at Manitoba Agriculture's 7 October CropTalk webinar, Don Norman reports for the Manitoba Co-operator. "Marketing is about selling high, and selling higher if given the opportunity," he said.
Making sales in steps when prices are attractive, while keeping some grain back for further rallies, helps producers manage risk, meet cash-flow needs and avoid selling in a downturn, he said. It also means accepting that prices sometimes rise after a sale: "Don't beat yourself up if it goes higher."
Drozd uses technical analysis to find "resistance" levels where markets have struggled to rise before. Manitoba soybean cash prices recently climbed to $16.50 a bushel, close to an earlier resistance point, with some deferred bids offering as much as $17 for January or February delivery, and he recommended using those bids to lock in sales rather than risk a retreat. In oats, special bids reached $5 a bushel in southern Manitoba, a level reached only a few times in recent years, and AgChieve has been advising clients to let some oats go at that price. After 40 years of watching charts, he said, he cannot reliably tell whether prices will break through resistance.
A good selling price starts with a marketing plan built on the farm's cost of production, break-even price per bushel and cash-flow needs, and how much to sell depends on the operation: one farmer may need to empty a bin for another crop, another may cover cash needs with oats while holding soybeans. As a rough guide, AgChieve recommends having no more than a third of a crop sold before harvest, rising to as much as half once the grain is in the bin if the right opportunities come.
He also urged farmers to set price targets with buyers nearer the middle of an expected range rather than the very top, so that sales actually happen, and to avoid being forced to sell in the valleys between highs for lack of cash.
Photo: Martin Cathrae / Wikimedia Commons (CC BY-SA 2.0)
Source: Manitoba Co-operator
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