October is a very busy month as producers are working hard to finish up the harvest of some commodities, while at the same time preparing the ground for planting both for this fall as well as next spring. Along with all the work that needs to be accomplished (depending on your area), we have been blessed with moisture and anticipate receiving more through the fall and winter months.
Just one of the exciting parts of agriculture is that we are always looking forward. Many of you know within just a few acres what you are going to produce in 2023. Depending on your operation, some of those acres have already been planted with the commodity already up and looking good – just waiting to move into dormancy for the winter.
But wait a minute; I got so caught up in visiting about harvest, planting and rain that I forgot about the fact that we still have commodities to market for this crop year as well as the next. Wow, that could have been costly to the bottom line of the operation.
Now don’t take me too seriously as this is a little tongue-in-cheek, but even though you are an expert at juggling all the different projects in your operation, every once in a while something gets dropped. Don’t be hard on yourself when this happens as even the professionals in the circus drop a bowling pin once in a while.
It’s important for us to remember that we are all just trying to do the best we can every single day. In agriculture (as in life), most often, the answers aren’t whether we did something right or wrong, but that we simply did it differently. I talk with people all the time who are focused on the fact that they didn’t sell on the high. Well, we all know that if we went back and looked at the data, we would see that very few actually sold at the high. After all, none of us actually know where the high is until it has come and gone.
Now that you have me back on track, let’s focus on managing your price risk in the market. We visited about this last month, but it is important we visit about it again. I don’t want to sound like a broken record (I just lost an entire generation of producers with that statement), but it is important that we all continue to study and learn different marketing strategies.
I believe we have visited about the fact that marketing at times is like trying to hit a moving target. Not only do the prices change, but also the “hows” and “wheres” of our market changes. This was the case back in August when the Grain Craft flour mill in Pendleton, Oregon, was a complete loss due to fire. Where those producers now market their wheat changed in just a few minutes. It also changed the markets in southeast Idaho slightly as the flour mills in both Blackfoot and Ogden will increase their production in an attempt to make up the difference. This doesn’t mean the bid for soft white in southeast Idaho will go through the roof, but every little bit does help.
We have seen the basis strengthen over the past couple of months. Historically, we see this happen through the end of November. December usually isn’t a month where the local demand increases, and the flour mills have already purchased their needs for the holiday season. If you are looking and following the basis, usually October and November are good months to market wheat. This applies not only to the domestic market but also for those that sell into the export market.
When looking at your 2023 crop, you should be watching the futures markets. Are the futures showing a carry charge into the deferred months, and how large or small is that carry? If we see a large carry, the market is telling us we have a good supply of wheat, and the market then has a very good chance of trending lower as we move into the spring months. These markets will give you the opportunity to use a hedge to arrive (HTA) or your own futures account in … let’s say, February and March to price new crop and manage the price risk in the market.
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