June 19, 2023 | Uncategorized
Take advantage of higher old-crop prices before they turn and think about pricing new crop to help with cashflow
There’s a point when old crop price drops. It’s usually in late June or early July. Don’t get caught with grain still in your bin when that happens.
Remember economics 101? Markets operate under the law of supply and demand. There’s a moment every spring or early summer when end users suddenly decide they have enough grain to get them through the rest of the year until new crop gets harvested. Demand drops. Price follows.
Sell now to reduce debt
The problem is, no one knows when end users will decide they have enough grain and prices fall. Interest rates don’t play into your favour if you hold old crop too long either. You might be in better shape selling your old crop now and paying off your operating line of credit or other debt. Consider selling old crop now to create summer cashflow in order to minimize interest costs and make timely fertilizer purchases.
There are different but equally good reasons to start talking to your P&H Grain Marketer about new crop. Storing grain comes with risks and expense. Fall delivery spaces are starting to fill at P&H locations. Don’t miss out on your desired delivery date by waiting too long to call your local P&H Rep.
Lock in delivery dates now
Staggered delivery dates can help spread out the workload through the fall and winter. Say a large grain growers has employees that need to be kept busy through the winter months. If the grower produces 20,000 mt of grain per year, they’ll plan their logistics so they move 1500 mt per month from harvest on. You don’t need to be a huge grower to think through how managing logistics better could impact your operation.
Start thinking now about how much grain you want to forward contract for the fall. Historically, summer prices trend lower as we get closer to North American harvest. Often wheat prices are stronger in June and July than in October due to harvest pressure pushing down prices.
Consider using a differed delivery contract to take advantage of forward contracting opportunities. Say you price 20% of your expected yield now. That limits your losses if prices drop heading into the fall. But the fact that 80% of your crop still isn’t priced means you can still take advantage of higher prices should they emerge.
Whatever route you choose, don’t hesitate to call your P&H Marketing Advisor. The sooner you call, the more tools they have available to help ease your cashflow and logistics issues and take advantage of higher prices before they drop.
Talk to your P&H Rep about your crop pricing strategy.