Marketing Expert Urges Forward Selling

By Tim Kjos

If you’re a grain producer, now is the perfect time to begin selling this year’s crop.

Even if it isn’t in the ground yet.

So says Betsy Jensen of Northland Community Technical College, Thief River Falls. Jensen is also marketing coordinator for the Minnesota Research and Promotion Council, and has helped organize grain marketing groups throughout the northwestern part of the state.  She was a featured speaker at grain meetings held across western MN in January, sponsored by MWRPC, Minnesota Association of Wheat Growers and the University of Minnesota Extension Service.

Jensen says the price trend line is following the same pattern set last year. “We’re looking a lot like last year in terms of prices,” she says. Still, she cites several factors that might be bullish for wheat:

•  It has been widely reported that world wheat stocks are as tight as they have been in several years.
•  U.S. wheat stocks are large, although other major producing nations have depleted their stocks. That means, according to Jensen, the U.S. remains the source for most other countries.
•  Projected higher fertilizer prices this spring may prompt a switch to soybeans.
•  U.S. winter wheat plantings are down 2 million acres this year compared to last year, and are at the lowest level in three decades.

Although the winter wheat crop is reportedly in poor condition, Jensen reminds that it in previous years the winter wheat crop has recovered to the point of record production. “Don’t count on Mother Nature to give us $6 wheat, because she can surprise you when it comes to the end,” she says.

Along with that possibility with winter wheat, Jensen says wheat producers should be mindful of other considerations that might be bearish, including a U.S. dollar that is stronger than most other currencies. This means U.S. commodities are higher priced, which may limit export potential unless major production problems occur in key wheat export or import countries.

Producers who have forward contracted at this time of year have typically made their best deal compared to other periods in the marketing year, notes Jensen. The grain market may again try to get farmers to plant spring wheat this year by offering a price rally.

“Once the wheat is planted, the market is probably going to drop back down again,” warns Jensen. “So if we do have a spring rally and you guys have not sold anything now, look to sell things on a spring rally.”

Between May 1 and Aug. 1, wheat prices usually fall 70% of the time, according to Jensen. In fact, in 7 of the past 10 years, the price drop from May to August has averaged 43 cents. It rose an average of 40 cents the three years the price went up.

Jensen says the value of a loan deficiency payment for spring wheat this year is an uncertainty. It was 80 cents last year when futures were $2.90, but is only about 10 cents now that futures are close to $3.60.

She says the general consensus of farmers in marketing groups is to forward contract at least 25% of their crop by May 15. Jensen says some producers have sold up to 75% by that date.

Kjos is farm writer for the Detroit Lakes Tribune/Becker County Record.

At a Small Grain Update in Hawley, MN in January, Fergus Falls, MN producer Cliff Keller gave an update on programs and activities funded by the Minnesota Wheat Checkoff, administered by the Minnesota Wheat Research and Promotion Council. Other Minnesota wheat checkoff-funded activities were presented as well.
Jochum Wiersma , University of Minnesota small grains specialist, discussed applying 2000 on-farm performance trial results to varietal selection in 2001.
Betsy Jensen, NCTC/Minnesota Wheat Council marketing group coordinator, gave an update on market factors to watch.
Tara Dagman, Minnesota Wheat Council program director, provided background on the Toolshed Ag Information Network, a new Internet-based source for farm, weather, and marketing information.
Dr. Leonard Francl, North Dakota State University plant pathologist, briefed producers on how to use the regional wheat disease forecasting system for effective fungicide application decisions.  In addition to Hawley, Small Grain Updates were also held this winter in Breckenridge, Crookston, Ada, Hallock, Argyle, Greenbush, and St. Hilaire.
The meetings were co-sponsored with the Minnesota Association of Wheat Growers and the U of M Extension Service.