Winter Time is Planning Time

Heather Moffit, Grain Risk Management Advisor, Agricultural Marketing First

Winter is fast approaching. It's time to start planning for next year. You probably have studied seed varieties and placed orders to enable top production potential. As well as finalizing production plans, it is also the beginning of the 2006 corn and soybean marketing season. Pricing and hedging for the 2006 wheat crop should already be well underway. If your grain marketing program for the 2005 crop has been unsatisfactory, now is the time to explore why, and make the necessary changes.

Just recently I watched a segment of Agvision. The guest that day was Dr. George Brinkman from the University of Guelph. He commented that he thinks Ontario farmers are in a precarious position. He feels that farmers are highly over- capitalized in terms of assets and their debt is too high. High land rent, thousands of dollars of new iron, increased fertilizer and fuel costs and a strong Canadian dollar have created very tight margins for grain producers. All these factors have placed farmers in a very volatile position. He suggests farmers should
"farm smarter". Do a better job of what you already do well. He stated that the number one priority should be management. Often during presentations he asks how many producers know their cost of production for every commodity using an accrual accounting method. He stated that in general 30% of the audience put up their hands. This means that in agriculture - a 40 billion dollar industry approximately 70% can't accurately state their cost of production (according to his sample). This, if true, is staggering. Today, the farm owner/manager needs to spend some serious time in the office researching markets for his product and aggressively securing price.

If you are one of those who could/should spend more time in the office, the following are some suggested strategies to implement this winter. As well as getting your crop plan in place, create a strategy for securing price for your product.

1. First, create your own space - your own office. Own a computer and know your way around it. You should, at minimum have an email account set up and know how to navigate the Internet.

2. Knowledge is the key. Understand commodity numbers. Assess U.5. and world supply and demand numbers. The USDA releases monthly data and quarterly grain stocks reports. The Chicago Board of Trade has a great site at http://www.cbot.com/cbotlpub/page/ 0.3181.204.00.html. Look at each crop independently.

3. Understand futures price prospects (price probability statistics) and basis influences (Canadian dollar). Merchandisers are usually willing to talk to you and explain where demand exists (or not) for your product both domestically and export.

4. Create a network of reliable resources. This should include agricultural news commentaries and merchandisers in Ontario. Bookmark sites you find informative so you can return to them for commentaries on a daily or weekly basis. The Chicago Board of Trade can provide you with daily commentaries at http://www.cbot.com/cbotlpub/page/ 0.3181.1033 OO.html or Darrel Good at the University of Illinois weekly commentaries at http://www.farmdoc.uiuc.edu//mark etinglindex.html are both excellent sites for current information.

5. Take a marketing course this winter either online or attend a workshop. Iowa State University offers an online marketing course at: http://www. extension. iasta te. edu/am es/introductions/ AGMintro. html Study at home using these marketing websites: Agriculture and Agrifood Canada - Managing Marketing Risk at http://www.agr.gc.ca/spb/fiapdpraa/cours/rmc0 0 e.phtml

6. Isolate stumbling blocks to success. If you have a grasp of statistical information but still have problems pricing grain when opportunities are present, would partnering wlth someone help? The advice of a creditable marketing advisor might be something to consider to keep you on track and offer objective advice.

It's the time for change. Over the last two growing seasons, price opportunities have been available. If you missed great marketing opportunities two years in a row, you know you've got to change the way you're doing things to be successful for the long term. Farmers are production specialists and enjoy working in the field. As you sit in the office this winter painstakingly putting your plan in place, keep reminding yourself that when spring comes you will be rewarded. That reward will come in the form of satisfaction that your marketing plan is in place as you head for the fields in the warmth of the spring season, ready to do it all over again.