By Brenda Stefanson, MSc, PAg, Regional Farm Business Management Specialist, Watrous
The crops are in and progressing nicely in most areas of the province. Before we know it, harvest season will be here.
Until this crop is in the bin, we won’t know exactly how much or what quality will be available to market. Whatever the yield or quality, having a marketing strategy will improve your returns by helping to manage price risk and enable you to make informed marketing decisions.
Grain companies offer a range of pricing and contracting options including cash sales, deferred delivery contracts, futures based contracts, option based contracts, basis contracts, pool contracts and self-loaded producer cars. To choose the option that best suits your needs, you need to understand and evaluate the market signals, current market trends and the risks and advantages of each contracting option.
There are many sources of unbiased and balanced market information for you to choose from. These sources will provide statistics such as stocks-to-use ratios and supply and demand data. They will help to interpret and evaluate the current market conditions and the trends that are influencing prices now and into the future. Saskatchewan Agriculture provides regular Market Trend updates. Go to Saskatchewan.ca and search for AGR Market Trends.
Knowing your cost of production for each crop that you produce will help you develop a strong marketing strategy that will maximize your returns. Once you know what it costs to produce a crop, you can determine the break-even price by dividing total (fixed and variable) cost by the expected yield. From there you can set your target price, the price you want from the market to cover all your costs and capture a return. A disciplined marketer triggers a sale when the market price matches their target price. Sticking to the marketing plan and target price can help you avoid the risks of giving in to the temptation of holding on in a rising market or panicking in a falling market.
For more information on developing a marketing strategy read the Introduction to Grain Marketing, stop by your local Regional Office to pick up a copy or call the Agriculture Knowledge Centre 1-866-457-2377. Don’t forget to follow the Ministry of Agriculture on Twitter @SKAgriculture for all the latest information on production, markets and farm business.