Modern farmers and the global marketplace

September 5, 2013 · 0 Comments

Farming can be a fickle business, with so many factors affecting how the local crops grow and sell. Farmers must be able to adapt to the changes year to year, keeping a close eye on the agricultural market.

As with any commodity, crops too can be sold before they are harvested. Farmers have the option of making their sales sometimes as much as a year before the crop will be ready. It’s a trend that farmers use for different reasons.

Jim Milligan is one of those farmers. He is a partial owner of Milligan Farms in Beeton, along with his brother Bob Milligan, who operates the farm. They grow soy beans and wheat and pre-sell a conservative amount of their products.

Many farmers pre-sell about 70 per cent of their produce or more.

These pre-sales can benefit the farmers, who determine the best time to sell based on daily market projections. Just as with the price of oil, the price of different crops are set daily by the Chicago Board of Trade (CBOT). Farmers like Milligan watch the prices fluctuate regularly and look for trends that tell them when the best time to sell might be.

The price of soy beans, for example, was set at $15.08 during seeding time in May of this year. By the end of August, the price had dropped slightly to $13.28. Although lower, Milligan says it’s still a decent value. Wheat was priced at $6.60 on August 5 this year, dropped to $6.47 on August 12, then up slightly to $6.54 by the end of the month. Milligan says this change could be a result of the wheat harvest not being as good as expected.

These fluctuations are caused by speculators in the Chicago market, says Milligan, who drive the market prices based on overall crop conditions throughout the Green Belt, which ranges from Alberta to Texas and East.

“If you pre-sell you know you’ll have your costs covered,” says Milligan, who explains that knowing how much money the crop will bring in before it’s harvested can bring peace of mind to farmers.

But while there are advantages to selling crops in advance, they come hand-in-hand with inevitable disadvantages. Inclement weather may cause devastating effects on plants, as well as the harvesting process itself, and crop turnout is never completely predictable. Drought or extreme cold can lower the expected crop yield. This is why farmers rarely pre-sell 100 per cent of their crops, to make sure they can meet the demands they have promised.

“What we do here in Ontario is so insignificant compared to what they do in the larger Green Belt of Western Canada and the states,” Milligan said.

While we see a lot of Ontario produce in our local supermarkets, especially through the summer months, it’s a small percentage of what our local farmers produce annually. The rest is shipped to other parts of the country as well as internationally, often to countries unable to grow certain crops themselves due to lack of land or conditions required.

Milligan’s soy beans are shipped to a harbour in Hamilton, Ontario, and from there they travel to European and far Eastern countries such as China and Japan. Some are distributed to crushers in Southern Ontario to be used for consumption in human food. Their wheat is divided between export to countries unable to grow wheat themselves, and flour mills in Ontario where the wheat is ground into flour for Canadian products.

Milligan hopes to sell most of his wheat in February of next year, since the crop may be sold for a better price if it can be kept until winter. Wheat, soy beans and corn must be stored at a maximum of 14% moisture to avoid spoilage of seeds in storage.

Local elevators offer storage for farmers without their own storage facilities. Farmers can choose to sell to the elevators immediately upon delivery, earning whatever the daily price is for their product. They can also choose to maintain ownership of the product and leave the elevator responsible for proper storage, until a time when the farmer decides to sell. Or, they can set a contract with the elevator to sell on a certain day in the future. In this case, a monthly storage fee is charged by the elevator, and farmers hope to sell at a price high enough to cover that cost.

The Milligan’s plant their winter wheat crop in late September, as Milligan says it starts well in the fall because of all the moisture. It requires a good, consistent covering of snow through the winter to protect the plant from the extreme cold, otherwise the frost can lift the root system of the plant, killing it. It is typically harvested in the last week of July or early August.

Milligan Farms has three storage bins to help keep some of the crop grown on the acreage they farm. Bin fans are used to maintain the correct moisture level of produce stored in these bins. Two bins are currently filled with wheat, but one will soon be emptied to make room for the soy bean crop, which will be harvested in late September and October, if the ground stays dry enough. Some of the soy beans will be stored in bins and the rest will be stored with a local elevator.

The plan, as with most soy bean farmers, is to harvest the beans and plant winter wheat immediately into the same ground. This is probably the busiest 3 week period on farms in southern Ontario, as combining and planting occurs in the same field on the same day as machinery operators are available.

By Emily Wood