It’s late July. Do you know where you’re wheat is going?
Clearly, the biggest event on the grain selling scene this fall will be the open wheat market. Growers have had a few months now to explore the options and even dip their toes in the open market water, which has appeared a bit murky at times. So what should you be thinking about as you get on the combine this year?
“Think about what you need,” says Brenda Tjaden Lepp, co-founder and chief analyst with FarmLink Marketing Solutions in Winnipeg. At the same time, she says, “Keep your ears open, listen, and be willing to bend a bit.”
That’s because Canadian wheat markets are still sorting themselves out for both buyers and sellers. Discounts and premiums, basis, transportation logistics — all the peripheral costs and risks associated with wheat sales — are being assessed on an individual basis. “All grain buyers are totally on their own to make those decisions,” says Tjaden Lepp. “And for the first time, every farmer has the option to negotiate.”
Independent grain companies, as well as the CWB, are still working out the details of their offers. As of mid-June, for example, the CWB’s handling contracts were still in flux. “If you want to sell through the wheat board, you’re committing to deliver to a very small number of elevators relative to the total number of options out there,” says Tjaden Lepp. She adds that grain handling companies are still in discussions with the CWB and, come harvest, there may be more options. But for now, proximity to an elevator that has a handling agreement is something you have to consider when deciding whether to do business with the new CWB.
Independent grain companies, on the other hand, are still figuring out what they can offer growers while managing their own risk. “Discounts and futures are becoming more clear,” says Tjaden Lepp. But they’re not crystal-like yet. “This is a really big change and it’s going to take a lot of time for a new system to develop,” she says. “Basically, the market is not transparent yet, but that’s more just a pain to deal with rather than a structural problem.
“It means that before you make a sale, you have to call a lot of buyers and have more than a 15-second conversation with them,” she says. “You may want your grade discount locked in, and buyers may say they can’t do that because it exposes them to too much risk.” Negotiation is definitely the name of the game now.
The good news, she says, is that grain companies are very relationship-focused and are therefore willing to hear about what individual farmers need. But, as Tjaden Lepp says, farmers also need to understand what the companies need in return. “It’s not going to be all the farmers’ way, or all the buyers’ way,” she says. “This is a now one-on-one business negotiation, and for the first time in a long time, wheat marketing can be the right deal for the right guy at the right time.”