A Peek at Plays of Area Marketing Groups

By Betsy Jensen

There are numerous marketing advisory service firms across the Midwest, ready and waiting to give you advice on when to sell your grain. But have you ever thought to ask your neighbor?

Marketing groups are fast becoming another important medium for farmers to receive marketing information.  Instead of relying on a voice over the telephone, farmers are turning to each other for information on grain marketing—and it’s beginning to pay off. Here are some thoughts on the markets from groups across the Northern Plains, and strategies they are implementing for the 2001 crop. 

Basis Contracts, Locked Futures, Basis Strength Focus of Ada Group
In Ada, MN, many group members signed basis contracts in early spring, and then locked in futures at $3.60. Mike Lockhart, the group leader, says the initial target for post-harvest sales is $3.74 December, but that will probably have to be downsized. “It’s our first target, and if our orders are placed, we know we’ll get filled.” For LDPs, the group is watching the Mlps Cash Grains summary (available on www.mgex.com) for the number of cars being tested on the floor. Last year this was a great indicator of basis strength.  If the car numbers go down, it means cash supplies are slowing and basis will improve, and it’s probably time to take the LDP as well. 

Williston “Margin Call” Group Look For Durum Sales
Ron Sylte of the “Margin Call” group in Williston says most members in his group didn’t forward contract any durum this spring. “It’s difficult to forward contract because of the quality problems,” says Ron. “You might think you’re selling durum at $3.75, when actually the bottom line is only $2.75.”  Now the group is looking at $3.50 for a practical level to begin making sales.  “We’re hoping for $4,” says Ron, “but $3.50 is a more practical price to begin looking at sales.”  The group has chosen not the use the durum futures at the Mlps Grain Exchange because of the low volume, which also makes forward contracting more difficult. Most of the malting barley in the area is already under contract, so durum is the main concern for the Williston group.

Grafton Group Using Puts and Calls
Grafton’s “First Marketing” Group has had good luck with puts and calls in the past, and those same strategies were used again this spring. Wayne Lessard says many members bought Sept Mlps wheat puts, and then sold Dec Mlps wheat calls this spring.  “We’re not doing what we hoped, though,” says Wayne. He explains that many farmers planned to make wheat sales this spring at Dec $3.70 futures, but that price target was never hit and farmers decided to use the puts and calls instead, which are working in their favor.  “The biggest kicker is the strength in the U.S. dollar,” says Wayne. The group is carefully watching the U.S. dollar index, since a dropping U.S. dollar will likely mean higher wheat prices. The group is expecting a post-harvest wheat rally into December, and will make sales at that point.  LDPs will probably be taken in wheat, if they’re high enough. The group isn’t willing to let the loan protection disappear for just a 15-cent LDP.  

Lisbon Group Waiting For Sales; Some Took Delayed Price Contract
The BCR (ND Counties Barnes, Cass and Ransom) Marketing Club in Lisbon has made few sales this year, according to club leader Virgil Dagman.  “There were limited corn sales in early winter, around January, but prices are below the loan so sales have stopped.”  Corn LDPs are also questionable, since the LDP plus the cash price doesn’t always equal the loan rate. “I would guess a little over half the farmers will take a loan on corn” says Virgil. Soybean prices are also below the loan rate so once again, very few members have made sales. In the wheat market, members will be watching the carrying charge.  “We’ve gone over the costs of storage and interest expense and looked at the March (Mlps wheat) futures.”  Many members also take advantage of the delayed price option offered by a local elevator.

Mott Group Learning HTA, Planning Pre and Post-Harvest Sales
In Mott, ND, group members were keeping a close eye on NDSU extension crops economist George Flaskerud’s marketing plan this winter, according to member Darwyn Mayer (See Flaskerud’s post-harvest crop plans on page 23). The group has 10 to 15 members and has been meeting for the past 18 months.  Group members have been learning to use hedge-to-arrive contracts for the wheat, and pre-harvest wheat sales have worked well for the group. Members didn’t make any pre-harvest canola sales since prices were below the loan rate, but with prices rising, members will begin setting targets for fall sales on canola, hopefully above the loan rate. 

Information Sharing Benefits Bottineau Group
Tim Semler of the Bottineau Marketing Group says crop condition information is one of the most valuable things he learns during meetings.  “If I talk to a friend in Iowa, I can share that information with the group.”  Group members keep in touch with friends across the Midwest, and bring crop condition information back to the group and try to focus on the big picture, and not just what happens in north central ND.  “Just getting together and sharing different information they find is a big benefit of the group.” Group members have been watching the volatility in canola and sunflowers, but no sales will be made until prices are above the loan rate, or LDPs have been collected.  Forward contracting was common for wheat, but no price targets have yet been discussed for post-harvest sales.

East Grand Forks Group Watching 2002 Futures
In East Grand Forks, MN, group members have decided to start watching 2002 futures, since the prices are much more attractive. Dec Mlps wheat in 2002 is trading over 40 cents higher than Dec 2001, and that means it’s at least worth a look. Many members have orders placed to sell at least a little bit of wheat for Dec 2002. Most group members have signed basis contracts for fall delivery, and some were able to lock in the futures price this spring. No firm numbers have been set for fall sales, but with so many basis fixed contracts, members will be watching the markets for a post-harvest rally to pull the selling trigger. 

For more information about marketing groups in Minnesota, contact Betsy Jensen, ag commodity instructor, Northland Community and Technical College, by email at bjensen@nctc.mnscu.edu or by phone, 218-689-5375.  In North Dakota, find more information about marketing clubs online at http://www.ag.ndsu.nodak.edu/aginfo/cropmkt/clubs/clubs.htm.