April 1998
Developing the Market Side of Risk Management 
by Richard Owen, Executive Director NAWG Foundation
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Prairie Grains is the
official publication of
the Minnesota
Association of
Wheat Growers,
North Dakota Grain
Growers Association,
South Dakota Wheat,
Inc., and the
Minnesota Barley
Growers Association.
One of the areas that will offer wheat producers an opportunity to spread risk will be production and marketing for specific end uses. Major food companies have already begun contracting on a small-scale basis back through the system for wheat. As end-use quality traits are identified that consumers are willing to pay extra for and the research community is able to breed for, processors will be looking for a consistent supply of identity preserved grains. This will offer growers an opportunity to deliver a specific product under negotiated contract for added value. It is the agriculture industry's version of just-in-time production.
In all reality, identity preserved or specialty grains will not overtake the marketplace anytime soon. However, more producers are already diversifying their marketing risks by selling the commodities they produce through several different avenues. For example: a grower who markets a portion of his production in the open cash market, through a value-added cooperative, and through a specialty crop contract.
Wheat has been one of the least-contracted farm commodities. One reason for this is the lack of a mechanism for exchanging information about changes and opportunities in the marketplace. Other crops, such as fruits, vegetables, potatoes, canola and barley, have a better link between producer and end-user. Wheat has traditionally been traded on the commodity market, primarily on price.
However, in the future, every link in the wheat chain, from producer to baker and from transportation to miller, needs to know how their role in the process affects the other parts. Only then, can we all share in the profits of added value.
The National Association of Wheat Growers Foundation, through a process of long range planning with the wheat industry, hopes to play a larger role in maximizing returns for all segments of the wheat industry, including growers. Through the establishment of a wheat industry alliance, we hope to create a forum where everyone who has a stake in the wheat industry can identify and work on common business interests, such as developing the market for identity preserved grains.
Recently, the example was given that the grain industry resembles many ships being at the shore ready to set sail. Everyone in the industry is trying to figure out which ship is the right one to be on. It is quite the challenge to know which ship to select. If you are able to have a presence on three or four ships, your chances of survival are much greater. Diversifying market risk in the wheat business is the same.
The NAWG Foundation was established in 1978 to foster scientific, research and educational programs for wheat producers, the wheat industry and consumers. The Foundation creates and conducts projects and programs that will help assure a solid source of information and opportunity for the many components of the U.S. wheat industry. n