Could of, Should of, Would of – Growing grain is only half the battle, you need to sell it too

Oh, what a roller coaster we have ridden. For those that know how to hedge, congratulations, for the rest of us, let’s just say we are not in Kansas anymore (for the young ones this is a Wizard of Oz quote).

 

The USDA report finally put what I would call the final nail in the coffin of optimism. This is why I find farming one of the most intriguing industries to be a part of. We can be pessimistic, then optimistic, and then pessimistic all within a three-month growing season. However, this is also why we must ensure we continue to reach out to neighbours and friends, sometimes this isn’t fun anymore.

 

As I drove home from the farm recently, I honestly believe the business practices we put in place may have saved the 2024 crop year for us. To be frank, we are way undersold on wheat to the point where I am not sure even a bumper crop would get us back into the black, but the rest of the grains will be more than enough to make up for this shortfall. We are far from perfect, and a little luck does come in handy.

 

When Jeff and I left TEPAP in January, one of the items we had written on the to-do lists was to get tight on marketing. We had already seen grain prices slip this spring way down from the highs the previous year and it was reason for caution (not pessimism, just caution). This is when we started identifying what our goal returns for the farm were and what prices and average yields would have to be to achieve this. Honestly, we went way past the per acre scenarios and down to the per bushel cost of production of each crop at our ten-year history yield. This clarity is enough to help you sleep at night.

 

This spring the markets were well above our 20% target return on both barley and canola. Wheat was still looking like a break-even crop but across the farm, with any yields above average, we could lock in our goal. This type of clarity then pushed us to lock in a large portion of 2024 canola and barley to our numbers. 

 

“But what if it goes up”? 

 

When many producers look at grain marketing they always focus on the what if? We have identified time and time again that we want the blackjack cheat card to make decisions. This is what knowing our goal returns and cost of production per bushel gave us – our ace in the hole. We knew we were locking in a large profit; we knew our insurance would backstop the contracts if we didn’t grow it, and we knew that this would be the “worst case” scenario no matter if yield or price dipped. Hindsight is 20/20, but this is also called a marketing plan which currently is escaping a large percentage of Western Canada per the statistics.

 

This isn’t anything new, Dr. Kohl has been preaching this across North America for years. If you shoot for the high, you will end up worse than selling into a profit. I don’t want anyone to think we created this, we merely took what professionals much smarter than us were saying and implemented it. Education is there for a reason, it’s just too bad that a large majority of the population does not believe it is necessary. For farmers, TEPAP and other similar programs are necessary.

 

We have identified that the ability to project out further will be a large strength for many operations that can. Locking in grains when you buy your fertilizer the summer before will become common practice as it locks in the margin. When you can fix both the cost and revenue side at the same time into a profit margin, you are winning. Then control your other costs and stop buying expensive toys (sounds easy but many can’t).

 

For many, this year will be a failure until, or if, we see the crop prices regain some strength. Now that harvest has started, I may avoid looking for a while, but hopefully, we still get the spring and summer push for those that can hold on for cashflow. For others, remember that many in the industry will feel this stress and anxiety right now so you won’t be alone. 

 

Farming isn’t the only thing, please remember that.