Farmers waiting to sell grain

It may be a while before the grain industry finds out who the big winners are in the post-monopoly sweepstakes for Prairie wheat, durum and barley.

Industry officials say many farmers are holding off on deciding who to sell this year's crop to until grain prices peak -- and that may not happen until early next year.

The president of ICE Futures Canada, Canada's leading agricultural exchange, said Thursday the worst North American drought in 50 years is likely the main reason farmers are sitting on their grain. Grain stocks are low, and that's driving up prices across the board.

With prices rising, there is no pressure to decide right away who to sell their wheat, durum and barley to now that the Canadian Wheat Board no longer has a monopoly over the marketing of those grains, Brad Vannan said.

"I've been speaking to the grain companies and the wheat board and they all said it's been fairly quiet."

The president of the province's largest farm group -- the Keystone Agriculture Producers -- said that's the feedback he's getting, as well.

"They're waiting to capture the highest price possible," Doug Chorney said. "They know there isn't going to be another crop grown between now and Christmas or January... so I think a lot of producers are going to hold back for a while yet."

Chorney also noted some farmers are still harvesting late-maturing crops such as soybeans, sunflowers and corn, so they haven't had time to figure out their marketing strategy.

He predicted some will sell a portion of their crop before Christmas because they likely have bills to pay. But most will likely wait and sell their grain in January or February, when prices typically peak, he added.

However, a spokesman for the CWB said farmers can't put off their decision for much longer if they want to participate in the board's price pools. The deadline for signing up for the early delivery pool, which requires them to deliver their grain by Jan. 31, is today. The sign-up deadline for the harvest pool, which runs until next July 31, is Oct. 31, Maureen Fitzhenry said.

Pooling is a strategy for risk management because it provides farmers with an average price received from all markets over the entire pooling period. That includes any price rallies that occur after they sign the contract.

"After Oct. 31, their options will be pretty well limited to cash contracts," which pay the market price on the day the contract is signed, Fitzhenry said.

"Some may think that's a good option, but others may think pooling is a good option, too."

Vannan said another factor that's complicating the decision-making process this year is the wide array of options farmers now have for marketing their wheat, durum and barley. They can sell it to the CWB, to more than half a dozen grain companies, or directly to an end user. Or they could opt for a combination of those choices.

And this year, for the first time, they also have the option of selling it through a futures contract traded on the ICE Futures Canada exchange.

"So it's logical... that farmers are going to take some time and look at all their choices, and analyze them, and talk to some trusted advisers before deciding what's best for their farm."

Vannan was the guest speaker Thursday at a Manitoba Association for Business Economics luncheon in Winnipeg, and he told the luncheon farmers aren't rushing to decide on the futures contracts, either.

ICE Futures Canada, which is based in Winnipeg, introduced the wheat, durum and barley futures contract last January to give farmers, grain companies and speculators a tool for managing their risk with those crops. So far, trading volumes have been light.

He said in a later interview only a couple hundred contracts have been traded so far. Most were for red spring wheat, and about 80 per cent of the trades were by grain companies.

But Vannan stood by his earlier prediction that the wheat futures contract has the potential to one day be as popular as the exchange's highly successful canola futures contract. It has many of the same features, and wheat is as big and as important a crop as canola.

murray.mcneill@freepress.mb.ca

Republished from the Winnipeg Free Press print edition September 28, 2012 B4