"Contract squeeze worries farmers " is the WP headline

[jazz]

Every second year or so we saw a, “Whammie Year” in the eighties. And every time some marketing outfits went under because they couldn’t fulfill their pre-sale commitments. But some guys (hoarders) made money because stowed away in their many small bins was not only next years seed but a few thousand bushels of flax, canary or low-grade wheat.They cleaned out those bins when the prices spiked. Good things come to those who wait - sometimes.

Sum, I have a couple old school neighbors who dont move their production until a couple months before the new crop is coming off. Yes storage can be a hassle sometimes especially with oilseeds.

Thinking about fleabeetle with all that stored crop. Guy is going to absolutely kill it if he unloads it all.

[bucket]

The commodity isn’t the comparison. It’s the contract.

Apples to apples his analogy is absolutely valid.

Yes right...got off track ...I agree..farmers signed those contracts.

Say higher priced fertilizer for next year and I get sidetracked.



This may set a bad precedent ...what if farmers sign 2022 contracts for high prices , have a bumper crop and graincos ask governments for a reprieve when prices fall to normal levels.?

[ajl]

Forward contracting now looks very bad but do keep in mind that the oil companies that hedged oil prices stayed alive during the oil crash. Their production is less weather dependent of course. Another factor is that part of the problem is due to governments and central bankers made a bad short term policy decision (as they always do) and used hyperinflation to keep from covid related defaults as well. These defaults are still coming. Had interest rates risen due to a sudden new demand for debt, as they would have in a free market environment, the nominal price rise of canola would be much more muted. During the deflationary period from 2018-2020, $12 canola was locking good for harvest delivery. I did book some and have bought some out already, but now that we got an inch of rain after a 5 to 6 week dry spell, will likely have bushels to cover. Also did have reserve moisture as canola is growing in areas that were a lake last year.

[dmlfarmer]

Apples and oranges....fertilizer is still being made in a drought , rain snow cold hot etc

...the only pricing mechanism is what they can get away with...

Pick another anology

There are other reasons for supply shortages other than drought or weather. Fire at a major storage facility, strike by employees, strike by railroads moving fertilizer, natural gas shortage at manufacturing plant, loss of a boatload of phosphate etc. Some of these out of control of the supplier. Do you think the automotive industry that is hamstrung by the chip shortage foreseen this happening on this big of scale.

You are right that there is no one or way we can pass on our costs hence we have to be even more conscious or risk and use appropriate risk management statagies

[farmboy44]

Yes right...got off track ...I agree..farmers signed those contracts.

Say higher priced fertilizer for next year and I get sidetracked.



This may set a bad precedent ...what if farmers sign 2022 contracts for high prices , have a bumper crop and graincos ask governments for a reprieve when prices fall to normal levels.?

Bingo

[Jay-mo]

How many times have I heard the line, "forward price, to take risk off the table".

[the big wheel]

Bingo

I thought grain cos didn’t own the grain? Which
One is it? Is anyone telling them if you don’t sign
There will be a consequence? Because that’s
Exactly what has distorted the whole balance
If you don’t sign a contract you won’t deliver
That’s a huge factor.

[Guest]

Bingo

Well , in 2013 lots used “force majeure “
What about the guy saying feed barley has to be 50 lbs , where the **** does that come from?
What about the crusher not buying our contracted nexera for contract price of July futures plus fixed basis as per contract ? Offering us less ?
FWIW , we only have a small amount of stuff contracted , should have more than enough to fill it and fully intend to fill them
And to the question of what the elevator companies would do if on the wrong end ?
Well let’s see? Oh I know ;
Ergot, fuz, test weight , grading games, has to be dryer than govt specs , protein games , well ,etc, etc, you get the picture (discount, discount, discount)
The good news is a whole new bunch of young farmers has learned what can happen
This will really **** up the yearly “harvest happy hour” occurrence

[Guest]

I thought grain cos didn’t own the grain? Which
One is it? Is anyone telling them if you don’t sign
There will be a consequence? Because that’s
Exactly what has distorted the whole balance
If you don’t sign a contract you won’t deliver
That’s a huge factor.

That is the ONLY reason we do it
More bins I guess

[blackpowder]

I can understand the dynamic some have of being far away from terminals. Adequate storage and transportation being infrastructure from the start.
Grade risk a factor when doing contracts for sure.

All you can do is keep your inventory unsold until in the bin while selling last years for cash flow.
Ends this thread.

[furrowtickler]

I will just point out that this disaster we are in was not completely a surprise. Everyone knew the soil moisture profile going into seeding and its easy to work out how much moisture was needed to bring a decent canola crop in. That number would have exceeded the usual annual rainfall in some places that attempted to grow it this yr. Our farm weather services like Drew were warning back in march.

Thats not saying Canadian weather cant turn on a dime, it certainly can, but the odds were long that we were going to get 12 inches if rain fall this summer.

Soil profile was not empty everywhere, and crops in a lot of areas were still average at the end of June . So blanket statements are really not cool right now.
A lot of guys did maybe 20% of average yields which is still very responsible.
It’s only the past 35-40 that killed the crop in many areas.

[farmboy44]

Well , in 2013 lots used “force majeure “
What about the guy saying feed barley has to be 50 lbs , where the **** does that come from?
What about the crusher not buying our contracted nexera for contract price of July futures plus fixed basis as per contract ? Offering us less ?
FWIW , we only have a small amount of stuff contracted , should have more than enough to fill it and fully intend to fill them
And to the question of what the elevator companies would do if on the wrong end ?
Well let’s see? Oh I know ;
Ergot, fuz, test weight , grading games, has to be dryer than govt specs , protein games , well ,etc, etc, you get the picture (discount, discount, discount)
The good news is a whole new bunch of young farmers has learned what can happen
This will really **** up the yearly “harvest happy hour” occurrence

I was agreeing with bucket alluding to if producers get a bail out for things going against them this year, why shouldn’t graincos get to argue it the opposite way another year. Bad precedent

Why didn’t you get the futures price plus posted basis? Where you the fella who left his july futures unpriced until June 30? Last traded price and highest bid are two very different things when volume is gone and it’s expiry day. I explained it a few weeks ago I can did up the post.

If graincos spec for feed barley weight is 50lbs that is because they have export sales and 1cw spec is 50lbs… 303g. Domestic feedlots likely have a bit softer spec, Ill be marketing some to them if I have weight issues but again, risk is a factor I know Cargills cheque is more likely to cash than some brokers or feedlots out there

Grade risk is BRUTAL. Don’t know what our price is when we sign up because we don’t know the spread because we don’t know the quality.. played the durum game for years learned not to lock in a 1

[AlbertaFarmer5]

I thought grain cos didn’t own the grain? Which
One is it? Is anyone telling them if you don’t sign
There will be a consequence? Because that’s
Exactly what has distorted the whole balance
If you don’t sign a contract you won’t deliver
That’s a huge factor.

Why can't you wait until the grain is in the bin to sign a contract that you know you can deliver on?

Why are so many farmers so eager to sell into what historically is the lowest markets of the year?

[furrowtickler]

The ag Industry as a whole has pushed guys into contracts for fall delivery on a few fronts .
1 . fall cash flow for inputs
2 . grain movement - no contract no movement at all till December or later , period
3 . early input buying - if you don’t buy early , inputs will be up 30% after December
4 . Very , very few can operate without fall grain movement and cash flow.
5. Bin space on farm , most have bin space for maybe 75% average yields, some have more in areas that have better weather the past 10 years .
6. Many were told not to worry there will be lots around to fill contracts........ but that becomes the individuals risk factor .

We should be covered as we should still get 30- 40% of a crop and are at our standard 20% or so , but many will not due to a very extreme drought situation.
Not saying who or what should or should not help but some of the comments here are truly ignorant to be honest .
Each producer has their own responsibility as to what they sign for sure , but to be condescending as to what others do is plain ignorant IMO.
No doubt some are heavy on contracts and yes they made their own bed but there is back ground issues behind a lot .
Some areas have had not much luck the past 5 years and seen an opportunity for decent prices for the first time in years to pre price at least some potential profit on an average crop . Most were reasonably contracted, some went balls deep and it is unfortunate now . But to wag fingers now after the fact is kinda spineless but not surprising from some here.

[Sodbuster]

I don’t think many of us dispute that if you sign a contract for X amount of bushels for X amount a price that you should have to deliver that amount or pay whatever the difference is in price of what the contract is and what the price is now. The point of contention is what will the grain companies charge for penalties I do believe that the government should step in or a third party if grain companies start charging exorbitant fees for getting out of a contract, over and above the difference in grain prices or get greedy with grading. Alternatively the grain companies could roll contracts to next year and charge the difference in price and a small fee for rolling. In no way should the government step in to compensate farmers for the difference in the contract price and the buyout price.