Marketing the ’03 Crop:

A Peek at the Plays of Area Marketing Groups

By Marlene Dufault

As harvest nears, here’s a rundown of grain marketing strategies and issues discussed by area marketing groups, summarized by their coordinators and facilitators.  Note that changing market conditions since this article was written (mid-July) may have also changed the strategies and focus outlined by these marketing groups.

East Grand Forks, MN Marketing Group
In East Grand Forks right now they have been pretty aggressive in their forward sales. A lot of the group actually made sales all the way last fall, when wheat was on its big rally for the 2003 crop year.  As far as making sales in addition to that, a lot of them are maxed out at this point for making sales. We have been targeting the range of about $3.70 - $3.80 to start making sales.  We have hit that several times for wheat. Most everyone has made some sales. The basis has been strong which is kind of an incentive to even sell a little bit more. We were kind of concerned about what is going to happen to the basis this fall, given the amount of grain. Our crop looks good and the crops look good around the area.  With this concern, some members are looking into basis contracts to lock that in.

With soybeans, we are not looking into making sales at this point since prices have fallen and everyone earlier started scaling up selling at around $5.00 cash.  At this point, do you wish soybeans go up or down?  If soybeans go down, they get to add an LDP onto the previous sales and so we are sitting kind of nice right now because up or down, we are going to be able to take advantage of the market.

We are already looking at 2004 sales.  We are watching for wheat prices in the $3.80 range. For soybeans, we are looking at $5.70 - $5.80 for November 2004. So those are in the back of our minds. We haven’t made any sales yet, but are definitely watching and thinking about it.

- Betsy Jensen

Froid, MT Marketing Group
The last time we met, we didn’t discuss any specific strategies at all, but looked at various news events going on. When we get together again, we will be discussing future contracts.   Unfortunately, there is a little bit of old crop left, but not very much.  I know that guys hate to get totally sold out, prior to seeding and again after seeding, in case they have to re-seed. 

– Kim Murray
 

Barnes County Marketing Group, Valley City, ND
I don’t know of anyone in the group that has any old crop. Most of them had their wheat gone by spring.  With new crop, we did have a bid that came out at one time with a zero basis so we locked in the basis for wheat.  It was the Dec contract with delivery sometime in September. We have not set the price for the wheat crop. 

The groups has had a couple of presentations.  The Stuart Peterson group has a program called Matrix, in which they work with producers.  I know that there were a few in the group who were interested in that, where they kind of tailor a marketing service and charge a 5-cent a bushel fee.

One of the things the group does very regularly is use charts. The members are looking at spring wheat, corn and soybeans, which are the predominate ones.  They keep a close track on where the markets have been and when it is oversold/overbought; where possible retracement levels are. Our members really rely heavily on the DTN charts and I don’t see it changing in the future.  They track where the markets go and its highs and lows. That is an important feature to them.  They are not doing marketing as an entire group, but discuss where the opportunities are. After talking about it, it helps affirm what the members are thinking.

We are looking at a very good yielding crop. There are still potential bushels out there that haven’t been marketed.  With some crops looking at 60-70 bushels, the potential is there for a good crop. Some producers have sold 30 bushels and so there are going to be some extra bushels that have to be sold at harvest.  With these extra bushels, the producers might be scrambling on what to do and still have yet to develop a marketing strategy for some of those bushels.

The group has really gotten smart on basis.  They know what the basis is at what time of the year and are always trying to get a better deal. They have really learned where the market is and what is a good deal.  And they are always trying to push to get it. The group is getting to be pretty shrewd.

- Randy Grueneich
 

Ulen, MN Marketing Group
We have been meeting every other week or every week over the summer. On old crop, a lot of people had done some hedging on wheat and what we are looking at now is trying to get a really good basis. There is still some really good basis to be had at the elevators and I think if we get the basis locked up, like for December, and then look for a rally back after harvest like in October/November.  Until then we would like to capture the LDPs if they are available, looking at the 2nd/3rd week of August for the LDP.

We are watching the number of cars of wheat going into the Twin Cities. Mostly old wheat is coming in now but we are watching this closely.  In the 2nd week in August, we should start seeing 200-300 cars of wheat a day.  In that timeframe it should get us our best LDP. Otherwise, we are going to sit on the wheat that hasn’t been priced until October or early November.

With soybeans, if we see any weather rally, it will be in August.  Right now there is the best new crop basis on soybeans that I have ever seen this far out ahead. If a person has done nothing else at this point, he should start looking at locking some basis for November delivery, at least start there if you haven’t done anything else.  Or January, if you can get a good basis for then, that is fine too.  You want a little more time to capture a LDP if there is one there.

—Mike Lockhart 

Mott, ND Marketing Group
There were a few members who did hedge-to-arrive on Dec. Mpls futures.   A lot of people grow durum around here, and there was quite a few cash forward contracts on durum. Most got in on the $4.25 bu for durum. We took a month off this summer and did crop tours of the area instead of meeting.

– Darwyn Mayer

Great Falls Marketing Club, MT
We try to meet on the day the USDA releases their crop reports and discuss what the report said and digest what the market did after the close. We don’t do a whole lot with future contracts but get into more of an informational session. The bulk of what we discuss is winter wheat and some peas, barley, spring wheat and lentils. Two of the members are grain buyers for the elevators in town, so we are fortunate because they bring that perspective.

 – Will Roehm

Williston “Margin Call” Group, ND
Most of the members grow durum, and the old crop is gone.  As far as the new crop, they have forward contracted some of it with a price range of around $4.00.  They plan on hauling it at harvest.  They are planning to sell spring wheat but there isn’t much to sell and not much is grown.

Busch Ag was out here last spring and contracted some malting barley at over $3.00.  Specialty crops such as mustard and safflower is grown along with field peas. The mustard and safflower has been contracted also.

We meet every two weeks, even throughout the summer. We have been together about 9-10 years with around 7 members.   We have sold individually with the group’s consensus but have not sold as a group.

The group is good for discussing issues such as the world numbers that keep changing and the market’s reaction.  Everyone brings advice and different newsletters and other information to the meeting to keep everyone current with the market situation.

– Ron Sylte

Moore Marketing Club, MT
We don’t have any more old crop to sell. We had a good price for grain from last fall and so a lot of us in the club were talking about doing hedge-to-arrive for 2003 back last Sept/Oct/Nov/Dec in 2002. A lot of members priced a portion of their crop at that time. We had another rally this spring, in the April/May timeframe and more guys sold then.  Both old crop and new crop were marketed in those two time periods. 

There is some new crop not marketed yet, as each member keeps a percentage of their crop that they don’t sell in case of a weather disaster or a situation like that. Right now, there isn’t an opportunity at this time to price new crop and our strategy will be to wait until Oct/Nov/Dec time frame to sell the remainder of our crop. Some wait until the spring of the year, waiting for that May rally. 

We do try to track the more favorable times of the year to sell. Right now is not a favorable time of the year to sell grain.  Our basis here was 51 under for ordinary winter wheat new crop, and we expect that to improve as we get closer to the Dec. time frame.

Our hedge-to-arrive is probably our main tool that we use.

Winter and spring wheat are the most frequently marketed crops as we use the hedge-to-arrive. We have had drought up here the last few years so barley hasn’t been as popular as it had been in the past. 

Our club is a market information club. We go over the different tools that are out there and the members have gotten a good handle on that. The Commodity Challenge (www.commoditychallenge.com) that the Montana Grain Growers Association got started was a tremendous tool for the guys to get their hands dirty without using real money. Having this hands-on tool was great for our members, and very helpful to us.

 – Bruce Pester

Jamestown ND Marketing Group
The basis level is still attractive on old crop wheat, so we were recommending anyone with old crop to sell. On new crop wheat, we have been doing charting on various elevators.  New crop wheat is around $3.00 at this time, which isn’t real attractive for locking prices.  So at this price, we are taking a wait and see attitude. 

Barley is the other crop we look at contracting. There is a big increase in barley acres and we have had some very favorable contracts. Most of the barley is contracted from anywhere from $3 - $3.30 per bushel. Soybeans are another big crop in the area and some corn. Not much contracting on these crops.

The clubs here have been working with Randy Martinson at Progressive Ag. He has been real active with these clubs and been presenting quite of bit of material to us. We have also been working with local elevators.  Members have been pooling some crops together and going to the elevator and trying to come up with a favorable basis, both for wheat and soybeans. So far it has been working out very favorable for the members.

Even though the prices aren’t there like last year, the crop is there so the attitude is good.

– Virgil Dagman

For More Information

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 Montana, find more information online at www. montanamarketmanager.org, or contact Alex Offerdahl, Market Manager program coordinator, ph. 406-761-4596. In North Dakota, find more information about marketing clubs online at www.ag.ndsu. nodak.edu/aginfo/cropmkt/clubs/clubs.htm, which also has resources for marketing groups.  Marketing Groups can also find a risk management curriculum online at http://trmep.tamu.edu/cg/list.htm . Here, extension economists from Texas A&M and Kansas State have prepared a series of fact sheets to be used as primary educational handouts or to supplement speakers who have covered particular grain marketing or risk management topics.

Starting a Marketing Group

Betsy Jensen, a marketing group coordinator with Northland Community and Technical College, Thief River Falls, says that it can be challenging for farmers to join a marketing group that has been meeting for several years. “Many farmers don’t have the marketing knowledge or skills to join an existing group, but getting involved from day one means you won’t get lost in the discussion, or left behind,” says Jensen, who has started two new marketing groups in Beltrami and Alvarado, Minn.

Those interested in forming a marketing group can find help in doing so online: http://trmep.tamu.edu/cg/overheads/rm2-34oh.pdf (Texas A&M guide to organizing a marketing club) and www.ag.ndsu.nodak.edu/aginfo/cropmkt/clubs/mcinfo.pdf (A guide to organizing a marketing group by NDSU).