Leverage crop and market data to maximize profit

While long-term demand for Canadian-grown crops holds strong even as some prices slide, business-savvy producers shouldn’t wait for premium market opportunities to make their move. Instead, say four market advisors, Canadian growers should take a good look at what they’ve got to sell and then target their real quarry — profit.

The quest for profit begins when farmers know their own break-even margins for every crop they grow. “It all comes down to leveraging your own data,” says Brennan Turner, founder of Saskatoon-based FarmLead, an online and mobile grain marketplace.

So where do Canadian farmers begin their market plan if they have crops to sell in early 2016? With the facts, says Turner.

Think global, act local

Farmers who keep up-to-date on world news will find opportunities others miss, says Turner. He describes this as, “learning to sell on rumour and profit on fact.” By late 2015, for example, global markets were rumbling with speculation about how low moisture levels might impact winter wheat crops in the Black Sea region. That, coupled with concerns about the quality of wheat harvested in Australia, could “create opportunities for one-off sales of maybe a couple truckloads, or maybe 10 to 20 per cent of your production,” he says.

What matters most is the focus on profit versus premium, says Ed Baldwin, a market advisor with Ag- Chieve Corporation, a grain marketing advisory service based in Winnipeg. World demand for Canadian-grown food is on the rise and the growth of middleclass consumers in countries like China and India signal increased opportunity for traditional crops such as wheat, as well as higher-value specialty crops.

Those who worry about the end of the latest price rally in wheat or canola miss the point, says Baldwin. Rallies are for speculators, not business people. “Producers in Canada need to know their break-even price and to recognize profit when it’s offered to them,” he says. Fluctuations in currency rates present other opportunities for profit. Because the U.S. is the biggest buyer of Canadiangrown crops, a lower Canadian dollar makes Canada’s products more affordable to its main customer, says Todd Austin, marketing manager with Grain Farmers of Ontario. And that’s the good news.

Keep in mind, though, that the Canadian dollar isn’t the only currency devalued against its U.S. counterpart. So what’s the bottom line? A lower Canadian dollar keeps Canada’s best customer looking north, but this is not a major advantage in some global markets. “In some markets, given the cheap cost of ocean freight … it’s basically a buyer’s choice of picking origins,” says Turner.

The lower dollar does, on the other hand, improve market opportunities for producers with economical access to U.S. buyers. “In southern Alberta, honestly, I tell my clients the U.S. may be their best market,” says Brian Wittal of Pro Com Marketing Ltd. in Didsbury, AB. “If you’ve got a good product and someone down there wants it, it may be better to move it in that direction instead of domestically — as long as your transport costs still allow profit,” he explains. “The key is knowing what they are going to pay you so you can compare that to the dollars and cents here.”

Many farmers in Eastern Canada also have a geographic advantage when it comes to selling wheat, corn and soybeans into U.S. markets, says Austin. Because growers in the east have better access to domestic millers and to export markets accessed through the St. Lawrence Seaway, it’s critical that their sales decisions take into account exactly who’s buying what, and what they’re paying.

Know your product

To take advantage of specific market opportunities, Turner encourages all of his clients to have their grain analyzed. In the months to come, he expects variable quality in the 2015 Australian wheat crop to generate, at least for a period of time, an uptick in prices paid for Canadian wheat sold into high-quality milling markets. That’s an opportunity lost for farmers who have high-quality, highprotein wheat in their bins, but don’t know it.

That advantage also works closer to home, says Wittal. This fall, some of his clients in central Alberta trucked their grain a little farther than usual because elevators in eastern Alberta paid a bit more for higher-protein wheat. “If you know what you’ve got for sale, you can profit off those opportunities,” he says. “If you don’t know what you’ve got for quality and protein levels, sooner or later you lose some opportunities to negotiate.”

Wittal and Turner don’t see an advantage to holding onto canola grown in 2015; wheat’s another story. “But if you keep something, keep the best,” says Wittal.

The crux of a good marketing plan boils down to managing risk. “It looks like cash is going to be king for the next year to two years at least,” says Turner. That means decisions about what you grow have to be based on what you can sell, and the price you sell at should be based on calculated data, not speculation. FF