Caution Advised on Forward Contracting


As tempting as it could be with crop costs as sturdy as they space, farmers must tread fastidiously when ahead promoting within the present inflationary atmosphere, based on Steve Kell.

Kell, who farms in Simcoe County and in addition handles grain merchandising for Kell Grain, stated in a digital presentation on the Ontario Agricultural Conference earlier this month it may be a mistake for farmers to promote too far out, when it’s close to not possible to know the place crop and enter costs are headed.

“This is a pretty honest comment coming from a guy who’s made his living for 25 or 30 years by getting farmers to forward contract grain, but I would be really careful about sticking my neck out into 2023,” he stated. “Yes, there are plenty of elevators and end users that have bids for 2023, but if inflation continues at this pace, we have no idea what our costs are.”

Back in the summertime of 2020, for instance, Kell stated it in all probability appeared like a superb enterprise choice for Ontario producers to ahead contract Soft Red Winter wheat for harvest in 2022 at costs of round $8/bu. The downside is that very same wheat is now greater priced and fertilizer costs have gone by means of the roof.

Kell stated it’s clearly a lot safer to ahead contract for 2022, just because most farmers by now have a superb deal with on what their prices are going to be and the way costs are going to look. The value of gasoline for this 12 months’s harvest is likely to be harder to pin down, however by and huge the opposite components within the revenue combine are recognized.

That is solely not the case searching into 2023, he stated.

“Be actually cautious about getting too far out over the handlebars while you don’t understand how excessive costs are going to go together with inflation, and you’ve got even much less management over how excessive your prices are goin

Click right here to see extra…