Preview: Navigating the Grain Markets 101

Broadcast Date: December 6, 2022, 1:00 PM Eastern Time
Series: Telus Agriculture

Presented By: Jason Labossiere, Nathalie Benjamin
Theme: Marketing

As a producer, you’re the CEO of your own company. It’s your responsibility to maximize each crop’s potential and competently align risk to reward. While this task is much easier said than done, accomplishing it successfully is the name of the game. Join us for this webinar where we will teach you the very basics of crop marketing so you have the foundational tools to start your journey proactively navigating your profitability.

  • Market volatility and risk management
  • Carry in the market
  • Cash contracts
  • What is basis?
  • Basic tools to manage your marketing

Click here to access a PDF copy of the slideshow used in this presentation.

Questions from the Q&A Period

Below is a listof questions that were asked during this webinar's Q&A period, along with answers provided by presenters after the presentation.

Question: Where does inflation fit in volatility?
Answer: Inflation is one of the many causes of volatility in the marketplace currently. Because of high inflation, central banks around the globe are adjusting monetary policy to bring inflation in check, primarily through increasing interest rates. Every change has a ripple effect throughout the economy as the markets try to re-balance supply and demand to fit the new reality. In addition to this, the global fight against inflation is making future demand very hard to forecast. The global economy is facing a recession. Times of recession are historically hard on commodity prices. The market is now trying to determine where prices should be everyday as we try to price in reduced demand and reduces buying power.  
Question: Should I be looking to lock in basis apart from board prices?
Answer: There isn’t one single silver bullet in terms of pricing tools but, in our view, yes, locking basis apart from futures should always be evaluated. Locking basis and leaving futures open is something you would consider if the basis is favourable or the conditions in the market are supportive for a good basis but the futures price isn’t attractive or, if you want to lock physical delivery but have a market bias that the futures may appreciate in value. On the other side of the coin, locking futures and leaving basis open is something you would consider if the futures were attractive, but the basis is historically wide or unfavourable and you want to give it time to come back to a more normal range. There are times when locking both the futures component and the basis component of your flat price makes the most sense. If you are going to utilize a basis strategy, be sure to have a good reason for doing it and have a strategy in place to lock futures.
Question: What is a line company?  
Answer: Line companies is a term used in Canada to describe the exporters or grain terminals that are located on the rail lines in Canada. Their business is mostly to buy grain domestically and then move it to an export position or to customers via their rail line access. Grain companies like Viterra, Cargill, G3, P&H and Richardson Pioneer and the like, are typical examples of line companies.
Question: Is there somewhere to access bid sheets?  
Answer: Buying grain in Canada is a very concentrated business with only a handful of key players competing for the grain from thousands of farmers. Because of the concentrated grain buying environment, buyers bid sheets are proprietary and typically won’t be posted publicly. Your best to contact your buyers to see if they have an online portal or platform they use that they will grant you access to. Most major companies will give login credentials to the farmers they buy from enabling them to access their bids anytime.
Question: What can I do to deal with market volatility?  
Answer: High volatility means increased risk, but it also means increased opportunity. The best place to start is to know your margins, have a marketing plan in place to help you navigate the grain markets throughout the year, and learn the pricing tools that are available to you as well as when and why to use them. Utilizing futures and options is key for commodities that are financially traded. Work with a broker you trust to help you confidently access and manage financial contracts. When it comes to managing volatility, these are your best tools if used properly.
Question: Does the new Farm Advantage app reflect Ontario?  
Answer: Farm Advantage is Canada wide. It was designed for producers across Canada to be able to access meaningful market information in an efficient and reliable manner. StoneX Canada’s cash brokerage buyer network is heavily weighted in the prairies however the match buyers and sellers across North America.
Question: Aside from calling local elevators and getting their bid sheets, what is the best way to understand the basis in my area? Is there a particular website that I use to track basis depending on where I deliver?  
Answer: Basis in Canada is proprietary and grain buyers have little reason to make their information more accessible. Unfortunately, basis takes some work to track and analyse. Working with a grain marketing advisory service like Know-Risk Crop Marketing is a great way to get price discovery and analysis for basis.
Question: How do you get people to set realistic profit expectations and pick a selling price? I.e. determine their level of greed and sell in peace? In a volatile market people don't seem to be able to be at peace with a price.  
Answer: Moving away from speculative decisions to becoming a price manager is a deliberate choice and is the start of allowing yourself to be more strategic and systematic in your pricing decisions. Keeping fear and greed in check is a battle every day. We work year-round and on multiple crop years at a time with our clients to help them isolate their farm margins and utilize different pricing tools to minimize downside risk at times and to maximize pricing opportunity at other times. We provide our market analysis to give perspective on the risk and opportunities present and work with each client individually to utilize the tools that align with their crop marketing goals.  
Question: What sort of methods would you use for a producer to hedge grains that don't have a direct market with futures? I.e feed barley? How would you hedge off the risk and price off barley? Hedge against US corn?
Answer: Feed barley has a reasonable correlation to corn so we are able to use corn as a cross hedge provided our clients understand that it will give protection against a general trend and not a one-for-one move with the domestic feed barley market. In other specialty markets, our only tool to remove downside risk is to physically price. In these instances, your best path forward is to utilize Act of God clauses when they are available and systematically price out portions of your grain throughout the year. Have clear goals and reasonable margin objectives in mind and stick to them.  


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