Use Grain Pricing Options to capture strong commodity prices - Parrish and Heimbecker, Limited

Use Grain Pricing Options to capture strong commodity prices

April 7, 2022 | Western Canada

As if you didn’t have enough on your mind, there is never-before-seen volatility in grain markets to add to your reason to lie awake, staring at the ceiling.

In our hyper, 24-hour news cycle, any small hiccup can cause a blip in the market. Relying on your own wits to capture those momentarily spikes won’t work, especially when prices spike in overnight markets only to settle back down by the time you sip your morning coffee and pull out your phone to check.

Fund managers and speculators aren’t making markets any more predictable. Complicated algorithms trigger overnight trades that can cause markets to move. This spring we’ve seen market swing 10% in one session.

Grain Pricing Options allow you to capture price spikes

Grain Pricing Options (GPOs) are an excellent way to to calm the waters and price grain for a profit. They take some of the emotion out of trading grain.

A GPO is a target price that is set for a specified number of tonnes and delivery period. It’s really easy. You work with your customer service representative at P&H to set the target price and then walk away. We will call you if the market reaches or surpasses the price you set. As soon as your target price is met, the GPO becomes a legally binding contract.

GPO protects you even while you sleep

A GPO protects you from missing your target price while you’re sleeping or even seeding, spraying or on vacation. It’s an easy way to get some peace of mind. A GPO allows you to scale up average prices in rising markets.

You can change the target price for your GPO if the market turns bullish and you think your original target price was too conservative. The only caveat is that you have to change the target price or cancel the order during business hours.

Use your cost of production and set deadlines

Once you know your cost of production by crop you can divide up your expected crop into chunks.

Determine an average price you want to sell your crop. You could set up a number of GPO targets below and above that price target. Set deadlines for yourself to adjust your GPO prices if your target prices aren’t met to help ensure you’re proactive with your grain marketing and make sales throughout the year.

Consider setting deadlines that correspond with periods that historically see the highest prices – typically when weather rallies occur. If your price isn’t met by the deadline, adjust.

Talk to your CSR

You have a lot on your mind and manage a lot of moving parts. Contact your local CSR. They can help you build a marketing strategy that works, even in these unpredictable markets.