Well, we are moving up on the halfway point in the calendar year, and most of you are in full swing in the growing season. In the Southern states, winter wheat has or will be harvested shortly, and we are six to eight weeks away from wheat harvest in our area. Idaho is a very diverse state, not only in what we produce but in soil types and climate. This is what gives us the opportunities we enjoy.
You are continually improving how you produce as well as producing a quality product we all want. Grain companies and flour mills like Idaho wheat for the simple fact that the quality is good and it yields very well on the flour mill. I know your cost of production is higher than in other parts of the country, but for the most part, the prices you are able to contract are higher 1than in other parts of the country as well.
I don’t want this to sound like you have it made because you most certainly don’t. However, there are certain times of the year when you can do very well in your marketing. Well, I don’t know if you noticed, but we just got a third of the way through this article before I mentioned marketing. Now it’s time for us to get to work. I almost hate to use the word “work” just for the fact that you have enough to do without me piling on more, but the fact still remains it does take effort to market your commodities.
I have visited with producers who say we should throw out all of the historical patterns because markets have changed; however, I disagree. Over the past five years, the patterns in the futures markets show us good pricing opportunities in the Chicago March futures between the middle of June and the middle of July. We then see another run higher in the futures the last half of October and then another the last half of January. This gives you three very good time frames to contract or hedge your wheat crop. If you have any questions just how to use these moves in the market to benefit your operation, “Let’s visit.”
The other side of your pricing equation is the local basis. The basis is so important to know and understand just what basis is and how it works. The basis is your very best indicator of the local supply and demand. The local basis will strengthen and weaken depending who needs wheat and how badly they need it. The basis has seasonal trends just like the futures markets have seasonal trends. What is important to know is that the trends higher and lower in the basis aren’t the same as the higher and lower trends in the futures.
I visited with a producer right after the first of the year. He told me then that he had already entered into a basis contract with the local elevator for delivery at harvest. I asked him why he had decided to do that, and his answer was that he had never done a basis contract before and he wanted to see just how that contract worked. I applaud him for wanting to and having the courage to try something different in his marketing plan.
However, when we remember that basis is the local supply and demand and that a certain amount of wheat is going to flow into the market at harvest just for the fact that it needs to, there is a very good chance that year after year harvest basis will be some of the lowest if not the lowest for the marketing year.
Knowing this may or may not have made a difference in his decision. When it comes to marketing, there usually aren’t right or wrong decisions, just different decisions based on what you know about your operation and what you can do logistically.
Marketing is important, but it is more important that we all are here to enjoy our families and friends, so let’s all be safe in the days and weeks ahead.
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