Issue 23
Marketing Guide
1999

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 Assocation.

Copyright Prairie
Grains Marketing Guide
Summer 1999

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Association Perspectives

Managing the gap in the grain price spectrum

Some producers will get burned in the process of selling their 1999 harvest, while others will make out quite nicely.  Take wheat, for example.  We've heard of one case of a producer who sold 9% protein wheat off the combine this year and with discounts, received close to $1.50 per bushel.  Ouch.  This story is unconfirmed, mind you, but it's believable. 

On the flip side, there is the case in SD where some 10% protein wheat was sold for December delivery into a no-protein contract for $2.85 per bushel– not a bad jump for a 1% protein difference. 

There will be some producers who will obtain nearly $5.00 per bushel for their wheat.  How is this possible, you ask? Let's look at the numbers: In early August, the loan deficiency payment was 52 cents per bushel in the Bismarck, ND area.  The price for 15% protein spring wheat was $3.10. With the LDP, the price is $3.62.  With a transition payment this year of about 62 cents, it's $4.24.  There is a strong possibility of another federal market loss assistance payment this year.  Assuming it matches this year's transition payment, our theoretical total is $4.85.  If you have 14% protein wheat, that amount would be closer to $4.50.  Throw in the possibility of a few more nickels and dimes per bushel from some market hedging, however, and you're brushing up against $5.00 wheat in the higher protein cases.

So it appears that this year in the Northern Plains, low protein will be as much a factor as market price in the lingering rural economic crisis.  Make no mistake, the additional market loss assistance payment if realized will be of great help to all producers.  It will help even the poor fellow with 9% protein wheat climb close to $2.50, and if he received a good LDP, perhaps close to $3.00 wheat.

Still, a difference of over $2.00 per bushel– from about $2.50 on one side of the price spectrum to almost $5.00 on the other, when all factors are considered– is quite a range.  There's no denying an element of management in determining where producers fall within that spectrum.

Did you top-dress nitrogen on some of your wheat? Did you take the LDP or put grain under loan? What's the best market timing for selling your high protein or low protein wheat? Should you sell grain at harvest or store it and sell later? What marketing strategies might you employ to put a floor under your price or realize a better profit later? All of those questions point to the fact that there are key management decisions to be made — decisions that become even more critical during a market slump.

Indeed, marketing your grain and understanding all of the factors influencing price this year can mean the difference between make or break in this price slump.  There remains a need for risk management education.  Furthering this objective remains a key goal for our associations, which depend on your involvement and support to be successful.  We hope you find the information and resources offered in this special Prairie Grains Marketing Guide to be useful. 

We invite you to Big Iron to see and hear another facet of our commitment to risk management education.  The Minnesota Association of Wheat Growers and the North Dakota Grain Growers Association are partnering with the USDA Risk Management Agency's RME program to bring you insight from Dan Manternach, president of Professional Farmers of America (Pro Farmer).

Dan will address many key marketing and ag policy questions producers are facing today. Registration for the first of our meetings will begin at 5 p.m. on Sept. 15, at the Doublewood Inn in Fargo.  The session will begin at 5:30 p.m. and go about two to two and a half hours. The second meeting will take place Sept. 16, with registration at 8:30 a.m. and a 9 a.m. start. We hope you will be able to attend these free sessions.

We hope you have a good harvest in 1999.  Thanks again for your membership support, and we look forward as well in furthering our commitment to you of legislative representation, information, and risk management education.

"Association Perspectives" represents the views of the Minnesota Association of Wheat Growers, North Dakota Grain Growers Association, South Dakota Wheat Inc., and the Minnesota Barley Growers Association.