Lock in Profit with High Commodity Prices | P&H Agriculture

Lock in Profit with High Commodity Prices

May 26, 2022 | Eastern Canada

Prices are high. We have a marketing tool that will help you hit your target price.

Everyone sees the opportunity in these historically high markets but if you’re like most growers, you’re also aware of the risk of missing the mark. High prices are a double-edged sword: There’s the opportunity to lock-in some seldom-seen prices but there’s also the fear of missing out on a price spike.

Don’t overthink your grain marketing strategy, especially at this time of year when there are so many other things that need your attention. Use simple Grain Pricing Options to lock in profits now and so you can get back to field work knowing your grain marketing is covered in these turbulent markets.

Know Your Cost of Production

The first step to confident grain marketing is knowing your cost of production. That’s been harder than normal this year with fertilizer in short supply and diesel prices going through the roof.

Be conservative. Plug in anticipated input costs that have some protection against inflation.

Let Your Marketing Plan Drive Decisions

Once you know your cost of production by crop you will know the price you need to lock in a profit. Divide your expected crop into chunks and determine an average price you want to sell your crop. Only market production up to the amount that is covered by crop insurance.

If you’re working on your marketing plan now, we recommend selling 50% of your new-crop soybeans today. Consider selling up to 30% of your expected corn harvest. No one can say for sure where prices are headed but one truth remains – high prices cure high prices. The market will eventually come down. Corn, soybeans, and wheat are all at multi-year highs. Harvest-delivered corn is trading at values some of us have never seen. Even if you have storage, start selling corn and soybeans. Consider selling up to 25% of your wheat crop.

Grain Pricing Options Take Mistake-Causing Emotion Out of Selling

Grain Pricing Options (GPOs) are an excellent way to to calm the waters and price grain and oilseeds for a profit. They take some of the emotion out of trading. They are widely used in Western Canada and are gaining in popularity in Eastern Canada. Growers are recognizing that they are an easy way to get peace of mind. A GPO allows you to scale up average prices in rising markets.

A GPO is a target price that is set for a specified number of tonnes and delivery period. It protects you from missing your target price while you’re sleeping, planting, or on vacation.

You work with your customer service representative at P&H to set the target price and then walk away. You get a notification 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.

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.

Set up a number of GPO targets below and above your 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.

You’re Not Alone

Trying to market when prices are at record levels can be unsettling. There’s a lot of emotion and it can feel like a lot is riding on every decision.

It’s important that you know you’re not alone. We have experienced grain marketers who are on your side and want to help.

Reach out to us and talk through your marketing strategy with one of our representatives. We provide sound marketing advice and access to most Eastern destinations. Along with direct market access to any of our company divisions in milling, feed or exports, this allows us to provide extensive opportunity to service our customer’s needs.