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Weather causes rollercoaster year of markets, industry experts offer advice

For those who turn to the ag page of the Cavalier County Republican to view the market prices, a trend has been visible for some time.


Posted on 8/13/16

By Melissa Anderson

The major crops for the area have had a volatile summer, and with harvest in the early stages, the outlook for a good return is as ever changing as the weather.

“Overall, the markets have been somewhat of a roller coaster this summer led by the soybean market,” Jake Brown, Grain Merchandiser at CHS-Milton, said.

Earlier this spring, the soybean contracts were down around the $8.75 mark, but since then the prices were on a steady incline until the middle of June with a high of about $11.85.

“A lot of this movement was caused by weather,” Brown explained, “The market was trading forecasts that were stating we would have a hot and dry July and August this summer. As we moved through July and the forecasts did not pan out we have been working our way back down. “

Currently, soybean contracts are sitting at about $9.85. The weather forecast for August and the August USDA Supply/Demand report will dictate where this futures market goes.

Canola followed soybeans up and down from March through today, and spring wheat has had a similar movement as soybeans, but not nearly as dramatic. At the beginning of March, the December spring wheat contract was around $5.30, but since then it only reached a high of about $5.80 in the middle of June. The contract price has since fallen to about $5.10.

“The biggest thing dragging wheat futures down and keeping them down is the US ending stocks are projected to be over 1 billion bushels, which is the highest since 1988-89,” Brown said.

Heading into harvest time the futures market is definitely depressed. One aspect that could help raise soybean cash prices heading into harvest is the strong demand the market is currently showing. Wheat futures are not expected to move very much in either direction as there is no reason for the futures market to rally. Brown explained that at the same time, he thinks the prices have possibly hit bottom for the time being.

“If wheat quality becomes an issue, you could see the specs start covering their short position,” Brown said, “If this happens you could see a bounce in the wheat futures market.”

With the amount of wheat currently available in the US, Brown doesn’t see a reason for farmers to do anything special until after the fall season. If producers have the ability to store their wheat until winter/spring time, that would be the best bet to hopefully get something more for their wheat crop.

Canola is a tougher one for Brown to give a forecast on what might happen to its prices. Once the canola harvest gets underway in Canada, the damage from the summer storms will be more readily apparent to that crop. If the damage adds up, farmers could see a bounce in the canola market. On the US side, the moisture that has permeated the area may lead to quality issues that could potentially prop up the market.

“Obviously, we will start to see if we have any quality issues as we get going in the next couple weeks,” Brown said.

Overall, the crops in the area look good, but with the wet conditions, harvest will be more difficult than normal for farmers. The biggest obstacle this year for farmers will be getting in the field to get the crop off because of the soil’s moisture saturation.

There is not much help on the international market to assist local farmers to get better prices for their crop either. This past spring, even though Argentina was hit hard with rain during their soybean harvest, it only affected the quality on about 5-10% of the crop.

“I think that is reflected in the US export demand we are currently seeing,” Brown explained.

In the Black Sea region, there is a little concern with the wheat crop as there could be some quality issues going forward due to weather conditions. Canadian wheat could potentially see some quality issues as well with the amount of moisture they have seen over the last month. That is similar to what farmers are facing in northeastern North Dakota. Even with these possible issues, however, the market is unlikely to be affected.

“With the US dollar still strong, our exports are more expensive for other countries,” Brown explained, “The strong dollar is hurting our wheat exports, and countries are able to find cheaper wheat in other wheat producing countries.”

Producers that took advantage of the rally over the summer and made Hedge to Arrive (HTA) contracts were proactive about their marketing for this fall and got some HTA contracts at decent levels.

“The guys that didn’t get as many bushels contracted at the higher levels over the summer as they would have liked need to be proactive going forward,” Brown said.

A lot of CHS’s orders for HTA contracts that were put in for producers fill in the overnight session. Brown stressed that it is important to have orders in with the area elevators on the chance that if the market does get better, farmers have a better chance of getting that price they had targeted.

“Know your break-even levels, and give your local CHS a call to put a marketing plan together going into harvest if you haven’t done so already,” Brown advised.

Alison Thompson, who operates the Farm Business Management offices in both Grafton and Langdon, mirrors Brown’s sentiments on knowing the break-even point and having marketing plans. Thompson is employed by Lake Region State College serving producers in Walsh, Pembina, Cavalier and surrounding counties. Currently, Thompson is working with about 35 producers in the area. In the Farm Business Management Program, Thompson works with growers of all ages and assists them in their financial management.

“As an instructor, I encourage everyone to practice good record keeping, and now is the time of year to update break-evens,” Thompson said, “I understand this is a busy time of year, but a couple of hours in the office can certainly help identify potential problems or concerns.”

Thompson offers some tips on ways farmers can help themselves survive a market in upheaval. Records and inventories need to be kept up-to-date. With this information farmers can examine cash flow needs and compare this information to their initial budgets and cash flow for the cropping year. Farmers need to be aware of where adjustments to both might be needed.

“From these records, producers can also update their break-even prices,” Thompson said, “Updating and knowing current break-even prices will give them a better idea of what marketing price may be profitable.”

Thompson also advises farmers to stay in contact with their grain elevators. By asking about contracts, the elevators will be very willing to help you.

“Remember to share your records, cash flows, budgets, and break-even prices with your lender,” Thompson said, ”Keep communication open with them so they understand your operation and can assist if an issue arises.”

Coming up with new marketing avenues for your crops or re-evaluating the break-even prices for your operation may seem a daunting task since the last few years, many farmers didn’t even need a marketing plan to be profitable. Thompson advises that staying with the basics is a great route to go.

“Talk with your grain elevators and see what contracts they are offering this fall,” Thompson advised, “Again, break-even prices are important and can be calculated using your estimated yield, direct and overhead costs.”

Farmers with more experience have been through years like this in the past, but for those farmers just beginning, however, they may not know how to handle some of these situations. Those just starting out also may not have a financial history to turn to which makes keeping the financial records meticulous at this point imperative to future success.

“As long as records are kept up-to-date, most of this information is easy to figure,” Thompson said.

Making sure farmers have a plan for the crop they plant and books in good order isn’t the only way to optimize financial success. Lesley Lubenow, an Extension Area Specialist/Agronomy at the NDSU Langdon Research Extension Center, offered a variety of ways for farmers to cut costs in their fields.

• Target plant stand populations instead of relying on seeding by lbs./bu. Seed lots vary in size from year to year, even with the same variety. Use seeds/lb. to calculate a seeding rate.

“You could be unknowingly over-seeding or under,” Lubenow stated.

• Canola is known for its ability to compensate. A Langdon REC seeding rate trial showed optimum plant stands at 9 to 12 plants per square foot. Typically, canola is seeded at 5 lbs./acre. A rough calculation of 5 lbs./acre is 12 plants/sq. foot. If moisture conditions are favorable, growers can cut back to around 9 plants/sq. foot, which is approximately 4 lbs./acre.

• Keep the fungicide seed treatment on your soybeans, but skip the insecticide option.

“We have so few early season pests that an insecticide seed treatment isn’t worth it,” Lubenow said, “A post insecticide spray is still on the table if cutworms show up.”

• Shop around for good prices and utilize local sale drives for repair and maintenance of machinery. Also, the dollar exchange rate is really strong for Canadian currency right now.

• Finally, don’t skip weed control. According to Lubenow farmers have to play the long-game with weeds.

“Resistance is creeping into our region. Keep the chemical pressure on the weeds for no escapes,” Lubenow said.

If you are interested in the Farm Business Management Program, Allison Thompson’s office is located at LREC. Lesley Lubenow is also located at the LREC. Both can be reached at the LREC number, 701-256-2582.