Storage
Ken Fulcher couldn’t believe what he saw. Or rather, what he didn’t see. After opening the doors to a long-closed pea mill, Fulcher expected the old product to be crawling with insects. But after searching through the entire mill, nary an insect was seen.

He and his staff analyzed the entire 70 tonnes of milled pea product in storage, and swept throughout the plant. No signs of any bugs at all.

“It was very unusual,” says Fulcher. “My background is wheat flour milling, and wheat flour mills generally have problems with insects. Knowing that, when I came to this plant that had been sitting idle for three years, I was concerned that the product in storage would be infested.”

Fulcher, a pea miller with the Parrheim Foods plant in Saskatoon for 11 years now, sat on his discovery for some time. But the revelation was never far from his mind. One day, he decided to do some experimenting on his own.

“I eventually got hold of some bugs from a local flour mill and made mixtures of wheat flour and a pea extract derived from pea flour, and dropped the bugs into the mixtures. And I found some exciting results,” he says. “The bugs died in very short periods of time. At this point, I thought I’d better contact an entomologist.”

Enter Dr. Paul Fields, entomologist with Agriculture and Agri-Food Canada’s Cereal Research Centre at Winnipeg, who expressed great interest in the findings. “Paul had observed that stored grain insects had been developing an immunity to Malathion, the major chemical used to control the pests,” says Fulcher. “And there are more restrictions on the use of phosphine, the fumigant often used to control infestations in grain.”

Fields has since published his findings after six years of research. He has found that the pea protein fraction from the yellow field pea straight from Fulcher’s pea mill, while nutritious for humans, is extremely toxic to the rice weevil, as well as the rusty grain beetle. Insects on wheat and barley are most sensitive to the pea protein, whereas those on maize are less so.

With such good results in the lab, Fields decided to see if he could get the same success in the bin. With support from Agri-Food Research and Development Initiative (ARDI) of the province of Manitoba and the federal government, and in-kind support from Fulcher, he started a two year project in 1999.

“In our trials, we infested the bins with three different insects – the rusty grain beetle and the red flour beetle, which are the most common insects in grain in western Canada, and the rice weevil which is a worldwide problem and which we find occasionally here,” notes Fields. “The rice weevil was very sensitive to the pea flour fraction, with a 90 percent reduction in population. We also observed a 50 percent reduction in the rusty grain beetle and the red flour beetle adult populations, and a 70 percent reduction in their offspring.”

(Some limited testing has also been conducted on household pests with encouraging results.)

In the second phase of the project, Fields and his graduate student, Xingwei Hou, will look at how the pea flour fraction can be applied on different packaging materials to deal with warehouse pests.

“There’s a lot of problems with insects in breakfast foods and other cereal based foods,” says Fields. Indeed, he notes there may be future possibilities of coating cardboard boxes with the derivative of the extract so that bugs can’t enter the processed food inside.

It’s a long road from the lab bench to the farmer’s field – or grain bin in this case – but Dr. Jim Bole, director of the Cereal Research Centre, is hoping the recently patented technology will attract a company to begin developing and marketing the extract. There are still some hurdles before this would be a useful tool for farmers. One would be the fact that the pea flour, which is added to the grain as it enters the bin, can leave a dusty appearance on the grain if used at high concentrations, which might not be very attractive to potential buyers.

“But the fact that this is a food additive makes it very attractive from a safety perspective,” says Boles. “There is certainly some potential for this product, but we need to find a company to assist us to put something like this on the market.”

With the public concerns about food safety and the use of pesticides, this all-natural ‘insecticide’ could be just the thing that can not only turn around public opinion, but also relieve a very real problem in the agricultural industry. -30-

Picture: Rusty grain beetles attack wheat kernels.

Picture: Xingwei Hou applies pea flour to barley for a bin trial at the Agriculture and Agri-Food Canada Experimental Farm at Glenlea, Manitoba last fall.

Picture: The Parrheim pea mill was found to be insect-free.

Over the last year, dozens of new models and designs of farm machinery have been introduced by manufacturers. Many of you will have seen these introductions at farm shows and in various industry announcements - but, can you remember the details? This feature provides a reference for you.
Peter Darbishire, Editor

While Top Crop Manager editors make every effort to be objective when reporting on new products, they cannot be held responsible for claims made by companies. Readers are encouraged to contact the companies for more details.

Simple bean harvest

Pickett Equipment's new Double Master and Double Master Plus pull-type edible bean combines have a design that is simplicity itself. Windrowed crop is picked up and fed into a single in-line auger-type rotor fitted with angled fingers to thresh the crop. Users say crop flow and capacity is exceptional.

 

Pickett Equipment

The smaller model, with a 66 inch pickup and 23.5 inch concave, harvests 3.5 to 5ac/hr and the larger, with an 84 inch pickup and 271Ú2 inch concave, 4.2 to 6ac/hr.

The combines are fitted with 6600 and 8800 pound bins respectively. The bins empty with a hydraulic dumping mechanism to reduce bean damage from augers.
 

 

Paddles to pump grain

Hutchinson

The demand for higher capacities in the field has driven the development of the 16 inch diameter grain pump system. The all new 16 inch Hutchinson unit delivers rugged performance and features 18,000bu/hr capacity.

The system utilizes the enmasse concept (grain pushing grain) with UHMW plastic paddles keeping the grain flowing evenly and gently throughout the system.

The Hutchinson grain pump has installation capabilities for beneath new bins or in existing in-line bin systems, allowing for future expansion. One or two drives will do all the loading and unloading.

 

 

Belt conveyor has high capacity

Brandt Industries

Brandt Industries launched its GrainBelt, the highest capacity 10 inch grain conveyor available, during the Farm Progress Show in Regina in June. The GrainBelt will be available in 65 foot and 75 foot units. The GrainBelt 1565 and 1575 models feature 10 inch tubes and 15 inch belts, and have performed in trials by the Alberta Farm Machinery Research Centre, to deliver in excess of 6000bu/hr at 25 degrees elevation, making it the highest capacity auger-free design available.

Many additional Brandt design elements bring new efficiencies to the conveyor market. The 39 by 44 inch collapsible hopper uses tubing for a strong frame. More spring pressure prevents sagging within the hopper while the grain belt conveyor is in use. An enclosed windguard prevents belt damage during storage due to high winds or environmental conditions and the adjustable angle discharge hood makes it easy to direct the product.

The larger, stronger scissorlift undercarriage consists of a wide stance 'A' frame. Brandt's GrainBelt 1565 and 1575 have three drive options available: electric, gas and PTO. The low angle design for the PTO drive has the ability to shift the 'S' drive up the tube for certain situations. The lower mount for the gas engine and electric motor on the conveyor makes it easy to start and service. Compression springs provide more 'S' drive wrap during all loading conditions. There are two types of belts available: a low temperature PVC belt with a brushed back; or a two ply rubber belt with nylon slider back. Better belt tracking and longer transitions result in increased belt life and prevent belt flipping or folding.

Go longer at harvest

Prairie Innovations

The Foisy auxilliary LongRanger fuel tank is designed to fit Case IH Axial Flow combines to extend fuel capacity by US36 gallons (136 litres). It is made from plastic raw material and fits beneath the rear shield of the combine. Tanks are supplied with brackets and fittings to make the two to three hour installation easy. No wiring, pumps or switches are required.

Grain storage bins are no place to be sloppy. Year-to-year sanitation, by cleaning out empty bins and treating with appropriate pest control products, as well as taking regular samples from full bins are all part of the diligence a producer should have. Infestations of insect pests or the development of moulds in stored grains can be severe, depending on conditions.

One protectant can be applied by shaking dust into an aeration fan intake.

Empty bins containing grain residue are usually infested with low numbers of insects and mites. Once crops are stored in the bins these pests can multiply and cause crop damage and loss of grade. Pests such as the rusty grain beetle, red flour beetle, weevils, grain borers and various moth larvae can reduce the value of stored grains. If these pests are not controlled, the stored crop is more susceptible to losses from storage fungi and air movement through the crop can be restricted.

Development of storage fungi and insects is favoured by moisture and moderate-to-high temperatures. Con-tinuing growth of these organisms in grains and oilseeds results in spoilage, heating and further insect infestations.

"Grain can be infested at any location throughout the handling and processing system. However, the highest likelihood of infestation occurs when the grain is warmest. For the most part, this occurs on the farm. Bins and elevation systems should all be cleaned thoroughly," says entomologist, Blaine Timlick of the Canadian Grain Commission.

He stresses the importance of using an integrated approach to protection using various methods. This is important in avoiding resistance to insecticides by pest populations.

After cleaning grain bins, another level of prevention is treating the bin and/or the grain that is placed into it afterwards. This can be accomplished by using products such as malathion, cyfluthrin, or diatomaceous earth. The malathion and cyfluthrin are conventional chemical insecticides registered for treatment of structures and can be applied as sprays. Malathion can also be applied directly to the grain for further protection. Diatomaceous earth based insecticides are non-toxic minerals which are insecticidal by removing waxes from the insect's body causing greater respiration and ultimately death through dehydration.

These products can be shaken into the aeration fan until the dust begins to exit vents at the top of the empty bin. To treat a layer of grain, it can be sprinkled on or introduced by shaking onto grain at the auger intake. It can alternatively be mixed with water in a spray application to the empty bin's interior.

Fumigation, by applying fumigant tablets to the grain or by treating empty bins is also an option. Fumigants produce the toxic gas phosphine and users should be aware they are also toxic to humans and farm animals. Therefore it is very important to ensure that the structure is as gas tight as possible. If the gas is allowed to escape, it is a health hazard and the concentration becomes too low to be effective.

Aeration is an important means of protecting stored crops or preventing deterioration. The temperature and humidity of the air in a bin can be managed with proper aeration, though there are many factors that influence this, like the cleanliness of the grain, the amount of disease or insect pests introduced or already in the bin, plus mechanical considerations such as airflow rates, fan size and storage capacity, and air conditions outside the bin. Aeration is a complex subject and there is plenty of expert advice to draw on for guidance, including Agriculture Canada's Publication 1851/E.

A monitoring program is also advisable: This can be done by entering the bin and observing the condition and smell of the contents. As well, using an insect trap and taking samples from various locations and depths within the bin is useful. There are also temperature sensing and carbon dioxide monitoring devices, both of which can provide useful information about the condition of the grain in the bin.

Timlick recommends that producers obtain a copy of Publication 1851/E, which contains useful information about the preservation of stored grains and oilseeds from spoilage. Some of the many insect pests which are commonly found are illustrated in this publication, as are useful techniques for avoiding spoilage of stored grains.

With top-grade chickpeas worth around $0.26 per pound, keeping an eye on the chickpeas in the bin is not something to be taken lightly. The loss of a 4000 bushel bin can cost upwards of $62,000.

“Chickpeas are expensive to grow and valuable in the bin. It would be a shame to lose it after harvest,” says Ray McVicar, special crops specialist with Saskatchewan Agriculture and Food at Regina.

Losing chickpeas in the bin is possible. Several years ago, some processors noticed downgrading due to heating of chickpeas in the bin. While storing chickpeas is not that difficult, Ron Svanes, a chickpea grower, processor and partner in No-Bull Marketing at Carmangay, Alberta, says a little attention to detail can go a long way towards protecting the value of the crop.

Once chickpeas are in the bin, keep a close eye on them.

Moisture testing is deceiving
The safe storage level for chickpeas is 14 percent moisture content. However, moisture readings taken off the combine can be deceiving. Because chickpeas have a large seed, the moisture reading can test dry but the meter is really reading only the outside of the seed. After harvest, moisture can migrate from the inside of the seed and the seed can sweat in the bin.

A good way to check for dryness is to break the seed open. If the seed is dry, the interior of the seed should snap. A soft, chewy seed is too wet for safe storage.

McVicar says sweating will concentrate at the top and middle of the bin and heating can occur. Once the crop is in the bin, he says producers should monitor the moisture content and temperature one or two times a week until the weather gets very cold. Once the outside temperature cools the crop and the moisture levels within the seeds normalize, he says the stored crop should not heat.

Use aeration
Svanes says many experienced chickpea growers use aeration to keep their chickpeas safe. “Chickpeas have a large seed size so they are easy to aerate. It doesn't take a lot of energy to push air through them or a lot of time to keep the crop conditioned.”

Aeration helps to dry out the sweating chickpeas. In addition, aeration can also help prevent mould from developing on the seed while in storage.

Extra handling and turning the crop, as is common for canola or other crops, is not a recommended practice for chickpeas. With a fragile seed coat and downgrades for chips, peels and cracks, Svanes says “less is better” when it comes to handling chickpeas.

At temperatures below minus 15 degrees C, the seed coat on chickpeas becomes fragile and can crack easily. Turning the bin at this temperature can really cause quality problems. The best solution is to get them dry and conditioned correctly in the first place.

Another tip that Svanes suggests is to pre-clean the crop before putting it in the bin if a lot of weed seeds are present. Because chickpeas are not competitive, weeds like Russian thistle or kochia might be present in the seed when harvested. These weed seeds can be green and can start the heating process in the bin.

Leaving the chickpeas in the field until they are mature is also important. Green seeds not only downgrade the quality but can also cause heating. For #1 chickpeas, grading standards call for less than one-half percent green. Svanes says chickpeas are relatively resistant to weathering, so it is better to leave the crop in the field to mature than to harvest too soon.

“We've had fields lay out over the winter and the quality has still been pretty good come spring,” says Svanes. -30-

Keeping good quality corn in condition in storage doesn't just happen. Careful monitoring and adequate, timely aeration are necessary to maintain quality. Monitoring of bins should become a routine. Whether that should be done every month or six weeks is up to individual growers. There is a distinct possibility that fusarium will reduce quality of corn in storage, so a shorter rather than a longer monitoring interval is definitely recommended.

Aeration of stored grain is essential to maintain quality. Aeration will not improve the quality of grain in storage, but rather hold it at the same level as when it was put into the bin. The aeration process accomplishes a number of things. The aeration air equalizes the temperature and moisture variations of the grain. In addition, aeration reduces temperature variations between the grain mass and outside ambient air. Try to keep the whole bin contents to within five degrees C of the average ambient air temperature.

In simple terms, the temperature of the corn in the bin should roughly follow the outside air temperature through the fall and winter. Any time that the grain temperature is more than five degrees C different than the outside air temperature, convective air movement will occur inside the bin. As the air rises it will warm, increase in moisture holding capacity and pick up moisture from the corn. The moisture being carried will condense on cooler surfaces. This cool surface may be a bin wall, bin roof or the grain itself. Unfortunately, when grain and free moisture are in contact for any length of time, spoilage is inevitable.

These spoilage areas develop their own unique micro-climates. For diseases such as fusarium that depend on elevated moisture content, this is problematic. Not only will mould growth increase, but stored grain will lose quality and harmful toxins will be produced.

The aeration fan should be operated for sufficient time to completely change the temperature of the grain in the bin. Running the fan for less time will halt progress of the 'aeration front' part way through the bin. Remember: any difference of more than five degrees C will set up convective air cells. The time required to completely change the temperature of a bin of grain depends on the airflow rate per bushel of grain, or CFM per bushel. Here are some typical airflow rates and hours of fan operation required, to completely change the grain mass temperature (see Table 1).

Coring a bin once it is full will redistribute the fines, which may cause airflow restrictions. Pulling a couple of loads out of the bin will remove the highest concentration of fines and establish the flow funnel. When these loads are put back into the same bin, the fines will be more widely distributed and not as tightly packed, as before removal. This will result in easier airflow through the centre of the bin. -30-

*Helmut Spieser is an Ontario Ministry of Agriculture, Food and Rural Affairs agricultural engineer at Ridgetown.

Fan size to suit the bin

To achieve 0.1CFM/bu maintenance aeration for temperature management (not for moisture manipulation), you will need a 3hp axial or in-line centrifugal fan for a 5000 bushel bin. For a 10,000 bushel bin, three to 7hp is required (axial or in-line), 7hp for wheat. For a 30,000 bushel bin, use a 10hp in-line and 50,000 bushel bin, 10 to 15hp centrifugal.

Grain storage and handling expert, Cliff Marsden at Al-Mar Grain Systems in Exeter, Ontario advises producers to also consider bin shape. "You need more horsepower for a tall narrow bin of the same capacity as a short wide bin, and the smaller the grain, the more horsepower you require," he says. Marsden has a software program to help calculate farm size recommendations. -30-

Often potato growers rely on the processing companies to have extra storage allowing the grower to deliver directly to the processor. However, Ralph MacKenzie, a grower from Alliston, Ontario, was not satisfied with the present system and decided to design his own facility. The result of this initiative is an innovative design that can accommodate two million pounds of potatoes per bin in five bins with computerized temperature and air controls.

Ralph MacKenzie explains his storage design.

“There are lots of growers who have storage, but I don't necessarily agree with the control they have, so I'm doing it my own way,” explains MacKenzie.

MacKenzie looked at the designs of his neighbours and he took a good look at the bins his father built several decades ago. In the end, he took the best of what he saw and added his own innovations.

He began by researching the type of wood he would need to use and then he began to consider the size of the bins and how to maintain the freshness of the crop. “The walls of the bins are fir to withstand moisture,” he says. “The studs are hemlock, which will also take moisture.”

Construction began in 1994 after MacKenzie had carefully planned all aspects of climate control and management. A computerized system for each bin maintains a constant temperature and humidity of 98 percent. “At 98 percent humidity potatoes will keep their size and maintain their freshness,” says MacKenzie. “The potatoes on the bottom of a bin won't get flattened by the weight of the ones above.”

Maintaining temperature and humidity is very important in MacKenzie's operation. Each day's harvest is probed for its temperature and the bin temperature is set accordingly. “The potatoes don't know they are out of the ground,” explains MacKenzie. “Once the bin is full, we gradually start lowering the temperature in preparation for storage.”

A five foot high basement trench under each bin, with a slatted ceiling for the bin above, has forced air circulation to maintain the temperature and humidity. When the bin is empty and is being washed and disinfected prior to being filled again, the wash water can drain into the basement through the floor. Fans in the ceilings of each bin continue the air circulation and control the temperature. The fans are on a computer system that automatically opens and closes louvres at each end of the bin in order to maintain the climate.

Having separate bins makes it easier to deal with problems, according to MacKenzie. If there is a problem with the computer system with one bin, it can be repaired without causing problems in the other bins. Similarly, if one bin gets contaminated, the trouble won't spread to the rest of the crop.

Doors at each end of the building allow for loading or unloading at either end and the five bin system allows for minimum disturbance of the entire crop. A telescoping boom recedes as the truck beneath it is loaded.

MacKenzie says it takes about three days to unload a bin at 35 minutes per truckload, but while one bin is being unloaded the other four are being maintained at the required climate by the computer system. He believes the computer system is an almost foolproof way to keep his crop in top shape. By putting the entire system on computer, he does not have to worry about sudden drops in outside temperature or extreme changes in humidity when he would have to manually adjust fans or vents. With the computer system, the bins are always at the required temperature.

“Once the bins are on the computer system, I never know when the fans will be working,” he explains. The computer system knows long before MacKenzie could tell on his own when the climate in the bins is changing.

“I designed this storage for the long haul,” admits MacKenzie. He maintains the time he spent on planning and research means that adjustments to the storage system are not necessary now that it is in operation. This factor alone helps reduce the stress of keeping a potato crop in 'just harvested' condition over several months of winter. With his system, this Alliston grower is maintaining control over his crop and its storage environment. As he puts it: “I always know whose (potatoes) they are and where they are!” -30-

When it comes to marketing new crop canola, a good option is to go for the flat contract price, or deliver it on a basis contract arranged earlier in the year. Either price will be better than selling it straight off the combine.

That is just one example of marketing advice growers can get from elevator agents, grain merchants and even agro-economists. But many growers are not seeking that advice and it is costing them money. Marketing experts agree that growers could make more money on the crops they market, but are missing opportunities to manage risk and increase profits because they do not take the time to build and execute an effective grain marketing plan.

At the Agricore United primary elevator in Moose Jaw, Saskatchewan, operations manager Derek Freeman sees it first hand. The week before harvest, phones are ringing steadily. Growers want to deliver and sell non-board crops as soon as they harvest. “In this area, our biggest non-board crops are flax and yellow peas. As we get close to harvest, the price always starts to drop. All of a sudden, growers will contract 30 bushels an acre on peas — that's their whole crop,” he says. “By not pricing ahead of time, they've missed out on some $5 peas that could have been contracted a few months earlier and sold it all for $3.50 or $3.60 a bushel at time of harvest.”

Agricore United's Derek Freeman says effective grain marketing planning last year helped growers in Saskatchewan achieve higher returns by pricing crops like peas in advance of harvest to avoid selling off the combine at harvest lows.

Freeman estimates that only one in five growers in southern Saskatchewan use marketing tools and advisors to get the most cash they can out of the non-board crops.

Most are cautious growers. They do not like to take risks. Their margin between profit and loss is thin; the size of their investment is huge. Yet, because crop prices are constantly changing and because they shy away from marketing aids, they miss the maximum profit potential from non-board crops like oilseeds and pulses.

Developing a marketing plan
The other 20 percent of growers, who do get better cash returns, manage the risks and plan ahead.

They develop a marketing plan, start early, stay disciplined, use contracts to reduce risk and avoid selling all their crop at once, and potentially at the worst time of year when the market is low. They do some self-education, adjust some habits, get some help, take a course and are rewarded with better cash returns.

“Having a good marketing plan and following through on it is critical to a profitable bottom line,” says Jon Driedger, a Winnipeg Commodity Exchange economist who presents seminars on how to use grain marketing tools effectively. For growers who do not routinely develop marketing plans, help is available from grain companies, independent consultants and government specialists.

“Not everybody's strength is marketing,” Driedger says. “It's worth paying somebody to help develop the marketing plan for your farm. Most growers will hire an agronomist to help them make crop management decisions; it shouldn't be much different with marketing.”

Growers cannot set grain prices, but they can select advantageous prices when they are available. Driedger advises growers to, “Try to be as educated and informed as you can. Combine that with advice from someone who is a full-time marketer and you should be able to put together a pretty reasonable plan.”

An effective plan will reduce the temptation to take unnecessary price risks, says Freeman. It will have achievable targets and is designed to bring home a reasonable profit. “Growers won't always hit the highs, but they won't hit the lows either,” says Freeman. An effective plan will also have a level of flexibility that allows a grower to respond to changing market conditions if the need arises.

Winter is a good time to begin a marketing plan. “It should be revisited as things change, probably twice a month,” Freeman suggests. “Check market outlooks, fall pricing, moisture conditions and make adjustments to figure what will work best.”

Key plan components
When building a marketing plan, growers should start with determining their cost of production, says Freeman. Comparing break-even price is the next component. This is where allowances for general costs need to be factored in, things like living costs, grain storage, machinery replacement, interest charges and taxes.

Agronomic considerations are a third component of marketing. These reflect production on a grower's farm and production trends worldwide for the crops that are produced. Based on experience, current conditions and the weather, a yield range for the current crop can be estimated.

Opportunities to grow and sell an identity preserved crop are another component of a good marketing plan. Often, for a small increase in record keeping, a grower can get a premium for contracting to produce an IP crop.

Growing IP crops provides many marketing benefits, says Freeman. “At Agricore United, we guarantee movement by a certain date, guarantee a price and help you budget. We provide financing on seed and fertilizer for malting barley, and if it meets the malting specs after harvest, we put you at the top of the list for delivery.”

Other components to consider are cash flow, storage costs and movement opportunities. For instance, the marketing plan should link sales to dates for major expenses and for emptying bins for new crop. The plan should also allow for shrinkage, or spoilage, and interest that could have been earned by delivering the grain in the bin and investing the cash in things like mutual funds, bonds or other financial instruments.

“I like to see farmers make a 12 or 14 month plan and keep it rolling. In fact, I like to see the plan extend to a minimum of five years,” says Neil Sabourin, an Agricore United grain merchant, based in Winnipeg. “The plan can change daily, weekly or monthly. It's good to keep with a certain strategy, but if the market tells you the strategy is wrong, don't ignore it, either. Farmers need to be aware that grain markets are increasingly volatile and they need to be responsive to market changes.”

Look for part two of this series — Effective use of grain contracts — in the next issue of Top Crop Manager.

Sabourin adds that the plan should provide enough flexibility for a sell off schedule when there is a market spike. “You need to be reactive to things like a crop production problem in South American soybeans, but you also need to pay attention to your specific costs.

“Don't depend on emotion and don't worry about coffee shop chat, but do watch for market signals,” Sabourin advises. “For a disciplined approach, every morning choose one or two market analysis sources to read or listen to and this will help you start forming opinions about what's happening domestically and internationally and how these can affect your prices. And weekly, phone the grain companies to ask their opinions about the markets and programs that could affect grain pricing or movement.” -30-

The powdered product can be applied through an aeration fan.

Grain storage bins, “Are no place to be sloppy,” says Art Schaafsma, pest management specialist at University of Guelph's Ridgetown College. “Year-to-year sanitation, using clean-out of empty bins and dusting with a pest control agent, as well as taking regular samples from full bins are all part of the diligence a producer should have. Infestations of insect pests in stored grain can be severe, depending on conditions,” he says.

Pests like the rusty grain beetle (the number one corn and wheat pest in Ontario), the bean weevil which attacks peas and beans, the Indian meal moth whose larvae feed on meal and grain, the granary weevil which does major damage if a bin is infested, and an up-and-coming pest, the lesser grain borer can wreak havoc in terms of stored grain value.

“Most infestations come from the farm: legs and bins should all be sanitized,” says Schaafsma. Dusting of empty bins is a good start, then it may be a good idea to also treat the bottom layer and the grain as it goes into the bin. The technique for dusting using Protect-It, a chemical free protectant which is made with diatomaceous earth, was demonstrated last summer at Ridgetown College's Southwest Crop Diagnostic Day.

The powdered product is non-toxic. It is shaken into the intake of an aeration fan until the dust begins to exit vents at the top of the bin. To treat a layer, it can be sprinkled on or introduced by shaking it onto grain at the auger intake. The product works by absorbing the beetles' waxy coat, dehydrating them to death. It can alternatively be mixed with water in a spray application to the bin's interior. -30-

Steel bins are being raised across the prairies by Louis Dreyfus. Last July, 35 'condo' storage units of 10,000bu (wheat equivalent) were part of the 1.1 million bushel elevator at Rathwell, Manitoba. Next August, 700,000 bushel (20,000 tonne) elevators will be ready to handle grain at Wilkie and Glenavon, Saskatchewan. They join similar sized facilities at Virden, Manitoba and Tisdale, Saskatchewan and smaller ones at Rivers, Manitoba and Innisfail, Alberta.

The elevators are designed for high throughput, with capacities to load 52 to 56 rail cars in 10 hours and unloading pits which operate at 15,000bu/hour.

The condo storage concept allows producers to buy 10,000bu storage for $20,000 over 15 years, which the company says works out to $0.14bu/yr. Plus, Dreyfus will buy back the storage after that time for the same price as producers paid.

Steel bins require lower capital costs and cut construction time in half compared to concrete elevators, according to the company. -30-

Top Crop Manager welcomes news from individuals, organizations and suppliers to agriculture. Please send news to:

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Over the last year, dozens of new models and designs of farm machinery have been introduced by manufacturers. Many of you will have seen these introductions at farm shows and in various industry announcements —but, can you remember the details? This feature provides a reference for you. -30- Peter Darbishire, Editor

While Top Crop Manager editors make every effort to be objective when reporting on new products, they cannot be held responsible for claims made by companies. Readers are encouraged to contact the companies for more details.

SP sprayer swath control
John Deere has introduced Swath Control Pro on 4720 and 4920 self-propelled sprayers. This new system controls the boom sections and spray nozzles turning on and off automatically based on a GPS coverage map that is created as the sprayer goes through the field.

Integrated with the GreenStar 2 system, Swath Control Pro applies chemical according to a GPS coverage map. Product is only applied where and when it is intended for extremely efficient chemical application. And with AutoTrac guidance, the operator sprays more efficiently by eliminating skips and reducing overlap in the field. This allows the operator to become more productive because of less stress operating the machine. -30-
John Deere

Harvest more data
Gleaner combines equipped with the new GTA Console II in-cab terminal are taking harvest operations and data harvest to a new level. The factory installed Console II is the 'operations control centre' for the new Fieldstar II yield monitoring and machine control system. With its ability to display and record output from almost all combine sensors, the Console II offers unprecedented machine function and crop harvest monitoring. The SD (secure digital) card slot and GTA100 Communicator personal computer software make it easy to download data to a personal computer for in-depth analysis.

The key to the new terminal's capability is the CANbus system that connects the Console II to every sensor on the combine able to output a signal, including the new Fieldstar II yield monitor with moisture and temperature sensors. Using the touch screen, soft keys and rotary dial controls, the operator can quickly and easily select from a wide variety of screens to view combine functions and crop yield data. Geo-referenced field and machine data can be assigned to individual fields or farms as it is collected and stored on SD cards similar to those used in digital cameras.

The 10.4 inch, colour display screen features automatic contrast control. Its daylight sensor ensures visibility remains constant day or night, and the display also adjusts to counter glare. Easy to recognize icons make it simple for the operator to navigate selections. To activate the icons, touch the screen, press the soft key, or scroll through options with the rotary dial and then press it in toward the screen. As new selections appear, touch selection or scrolling offers new options and settings, such as moisture limits for a given crop, which then can be selected and adjusted.

Using the Console II, operators can track and log information on area covered, work rates, fuel consumption and other field and combine data. Selecting a job for a field or farm when first entered ensures that all data gathered on site will be assigned to that field or farm for later analysis. Data can be stored on any size SD card between a minimum 64MB and a maximum 1GB. All 5 series combines currently equipped with DataTouch terminals are easily upgraded. All plugs and wiring harness connects remain the same. The older terminal is removed and a ball mount is installed on the backside of the console for mounting. -30-
Gleaner/AGCO Corporation

Hand-held monitor helps maintain optimum storage conditions
Westeel has introduced an advancement in grain storage: its new EasyCheck monitoring system. The most sophisticated and easiest-to-use grain storage monitoring system on the market today, EasyCheck provides the producer with instantaneous digital reporting of both current and historic storage temperature levels, says the company. This allows the producer to finely tune aeration to both achieve and maintain optimum temperature and moisture levels in the bin, providing the best chance of avoiding spoilage and shrinkage to deliver the grain to market in peak condition.

Available for both smooth-walled and corrugated bins, EasyCheck is a two part system that comprises a hand-held monitor and a cable which is hung from the roof with sensors every four feet to profile the temperature of the bin. The hand-held unit features intuitive controls and a large, easy to read display capable of viewing interconnected groups of cables, as well as the complete storage history by table or graph.

Another important benefit of EasyCheck is that the producer can now determine both when and for how long to operate aeration fans. As such, most EasyCheck users find they are able to significantly reduce fan time and electrical costs. The EasyCheck system comes with a recharging kit, a carrying case and a PC connection for downloading of information to a computer. -30-
Westeel

High definition GPS for agriculture
The Outback BaseLine is a high definition GPS system for agricultural applications. It has more accuracy than standard GPS and is much more affordable than RTK GPS, says Hemisphere.

Farmers who have not yet invested in GPS guidance can use one Outback BaseLine unit to replace several sets of mechanical disc markers, usually for less than the cost of a single set. Outback BaseLine eliminates the time and effort involved in folding and unfolding, greasing and other maintenance of disc markers, while providing better accuracy and performance. It will also function reliably at night when disc markers are difficult to see.

The very portable and easy-to-use Outback BaseLine features a data transmitter, internal battery and integrated base station that can be set up in two minutes and operated at one or more temporary tripod sites at the edge of a farmer's fields. Several BaseLine Rovers or vehicle-mounted GPS receivers can be serviced using a single Outback BaseLine unit.

Outback BaseLine's five to 20 centimetre accuracy is available at approximately half the cost of RTK GPS. The innovative product's high performance is due to Hemisphere's Crescent GPS technology, including a special receiver module and proprietary chipset.

Crescent features: Coast software that enables receivers to utilize old DGPS correction data for several minutes without significantly affecting the accuracy of positioning — a big advantage during temporary signal blockages or outages; and lower power consumption which is ideal for mobile and battery operated applications.

Outback BaseLine features simple status lights, a battery monitor, recharging via an AC charger, and external power options including cigarette lighters and AC outlets. BaseLine also works well on any continent at any latitude, with no subscription fees. Its Coast software bridges the temporary gaps when signals are not available. -30-
Hemisphere GPS

Managing water wisely
The Field Scout TDR series has two volumetric water content modes: one for standard soils and one for higher clay soils. In volumetric water content (VWC) mode, the meter converts a measured electrical signal into percent soil moisture content using an equation valid over a wide range of mineral soils. In irrigation mode, the meter displays a relative water content (RWC) on a scale of zero to 100 corresponding to a user-defined upper and lower soil moisture reference level. Water deficit, the amount of water needed to bring the soil moisture content up to the upper reference level, is also calculated and displayed. The reference levels are easily programmed into the meter with the accompanying software. Create up to two management sites based on the soil types and crop needs. Use the raw reading mode — measurement period in microseconds — to do soil specific calibrations. An internal data logger and RS-232 port allow for use with a DGPS for geo-referenced soil measurements (TDR 300 model only). Includes software and PC cable. -30-
Spectrum Technologies

 

Contract it, then deliver. It is a simple approach, but one that can help growers manage risk and achieve income goals for their crops, say grain marketing experts.

Grain marketing experts recommend growers increase the percentage contracted as the crop yield potential is determined with a maximum of 50 percent contracted up to harvest time.

Contracting offers growers many choices for how to sell crops that do not go through the Canadian Wheat Board. When used effectively by growers, contracts soften the sharp edge between supply and demand and minimize the effects of supply and demand on price. By buffering supply from demand, growers can gain better prices in the long-term as well as more stable income.

Contracts also provide benefits for grain traders who need to set delivery dates and prices. At times, grain traders are willing to agree on purchases two years in advance of delivery because it helps them with planning and marketing.

Forward contracts
The forward contract is a basic marketing agreement and most grain companies offer one, says Jon Driedger, Winnipeg Commodity Exchange economist. “It simply locks in the price, today, for delivery later.” It is as locked as a savings bond, but it offers security for both sides. “It's not for today's bills, it's for planning ahead (for future bills payment) so growers don't end up being forced to settle for spot market prices,” he says.

If they want, growers can take a price and delivery date up to two years in advance on some crops. The forward contract enables a grain company to lock in a supply so it has grain to offer end users. “Like a farmer, the end-user is exposed to price risk and may want to buy far in advance of delivery,” says Driedger.

Target price contract
A target price contract offers a grower several advantages, says Derek Freeman, Agricore United operations manager at Moose Jaw, Saskatchewan. It is a legal offer from the grower to a company stating a certain amount of grain is available at a certain price for a short period. It can be offered before new crop is in the bin, but the more frequent use is after harvest. It only becomes a binding contract if the offer is triggered by a grain merchant.

Growers can manage risk and maximize returns by contracting crops in stages.

Target price contracts are a handy option, especially if a grower will be away for a week or two. If the market rallies while he is away, he can have a target price offer on the table. If the market rallies to that price, the merchant will trigger it or confirm the contract.

“Suppose canola is at $7.75 (on the market today) and the grower wants $8,” Freeman says. “He signs a target contract for $8 at no cost to himself and offers it for a week. During that week, the producer cannot sell that canola to anybody else. Our merchant decides whether it works for him. If it does he can accept the contract.”

Freeman explains how some of his customers used this option in 2004. Flax futures were offering $10.50 a bushel for a while. A few astute growers spotted the opportunity. They offered target contracts at $11.25 a bushel and merchants triggered the contracts. In October, those contracts paid at $11.25 a bushel when the flax was delivered. At the same time, non-contract flax was being purchased off the combine at $8.95 a bushel.

“Both are good returns, but that's a lot of money,” Freeman says, “On 25 bushels an acre the difference was $57. On a quarter section, that's $9120 difference for the same product.”

How much grain should a grower contract?
Forward contracting is a commitment to deliver. It has a certain risk element, particularly if the new crop will not be harvested for weeks or months.

How much to contract is always an issue, even if a grower is equipped with a marketing plan. He knows how much cash he needs, when he needs it and the outlook for prices. He also knows things change; planned production does not always reach the targets.

The answer is a guideline, not a rule.

“Some growers have more tolerance for risk, some are in a financial position to take on more risk,” says Jon Driedger, Winnipeg Commodity Exchange economist. For both, a marketing plan provides a light in the tunnel. Generally, he suggests, it is best to diversify the risk by a series of sales or contracts.

“In general terms, if there's a profit margin to be had, I encourage producers to lock in a portion of it with a futures or a forward contract,” he says. “Move it in portions over the year; adjust the amount to contract at any time based on market conditions and outlooks. Have some price targets and, if a price target is hit, lock in a little more.”

In the bin, crop that is ready to sell can be sold according to the best combination of cash flow needs and marketing opportunities. Ideally, take contracts on old crop to capture market spikes throughout the winter and spring.

When working with growers, Derek Freeman, Agricore United's operations manager in Moose Jaw, Saskatchewan, recommends contracting the new crop a bit at a time — in increments of five to 10 percent, to a combined maximum of 50 percent up to harvest time.

There are three primary times for these contracts — before seeding, after emergence and mid-season before harvest. Growers are advised to contract at a time when the futures price is attractive and when they are confident of their yield expectations.

For example, a mid-winter contract would reflect the yield expectations for the new crop based on the moisture supply in the ground and perhaps the past year's growing conditions. Yield estimates can be refined again after the crop has emerged and again in mid-summer.

“A grower doesn't want to forward price more than 50 percent before harvesting,” says Freeman. There are two reasons. First, an early frost or a wet fall can dash yield and quality expectations without warning. If it happens, contract benefits can reverse quickly for a grower who is over- committed. “There are large buyout costs for contracts on non-board grains that can't be filled,” he warns.

Secondly, holding 70 percent provides the opportunity to cash in on market spikes that will occur in coming months. Merchants are buying on the basis of world supply and demand, and prices they offer are always adjusting. -30-

 

Minimum (maximum) price contract
A minimum or maximum price contract is likely the best option when grain must be delivered immediately, usually due to lack of storage on the farm. Instead of taking the spot price that day, the grower buys some flexibility on the pricing and a better return. He has the right to price the grain later, for a specific period, but needs to watch and form opinions on the market direction.

If the market rallies above the floor price of the minimum price contract, the grower can lock in a sale at the higher price; if the market stays flat or drops, he loses the premium but still gets the guaranteed minimum. The opposite is true for the maximum price contract.

“Suppose the minimum price contract guarantees $8 a bushel,” says Neil Sabourin, Agricore United grain merchant based in Winnipeg. “You don't want to sell at today's price because you have the opinion the market will increase, but you're worried about storage. You can deliver the grain right now, get it out of the bins and have a floor price which is slightly less than our current fixed price contract (because you've paid a fee for the contract). Then you wait and watch the market.

“At a later time, if the market increases, you're allowed to lock in a different futures value that's even better. You have the option to take advantage of market rallies,” explains Sabourin. There also is a parallel contract. If the grower wants to deliver now and expects the market to drop, a maximum price contract also is available and works in a similar fashion.

Basis contract
There is always a difference between price offered at the local elevator and the commodity price on the futures market. That difference is the cost of doing business. The amount of that difference changes and that is called the basis. Basis contracts are considered powerful tools, but also require a grower to be very well grounded while watching the markets daily.

“An attractive basis means the company wants to buy,” says Freeman. An attractive basis is narrow or cheap from the grower's viewpoint. Perhaps today's price is low, but the basis is attractive. If the grower expects a price increase, he can lock in that narrow basis for a period of time, like two or three weeks, then wait and sell at the narrow basis when the futures price is higher. There is also an option to roll-over the basis contract to the next month.

“Suppose canola is showing a basis of $20 on the futures in western Canada,” says Sabourin. “Grain buyers will pay the grower $20 less than the futures price to deliver it to the elevator now. If the farmer would prefer a $15 basis, he can enter that as a target contract, and it would be up to the grain merchant to determine whether to take on that basis.” -30-

 

The rancid scent of ammonia. The flurry of fruit flies. Visible signs of moisture on the surface of potatoes in storage. Crop specialist Robert Coffin of Cavendish Farms in Kensington, Prince Edward Island, has seen them all. But he will not debate which one is the most obvious sign of storage rot. With a Ph.D. in plant pathology and several published scientific papers specific to storage rot to his name, Coffin knows why the problem persists. But why talk about the problem when “there's so much more to be gained by targetting prevention?” asks Coffin.

Ian McGillivray's approach to managing storage rot disease focusses on prevention.

From seeding to harvest and storage, “Many potato farmers forget potatoes are living creatures. They need oxygen, they give off heat, they give off water,” notes Coffin. Forget that and you pay the price. Storage rot can force individual producers to adjust their shipments of stored potatoes to processors. Others face rejection of raw products because storage rot diseases contribute to production hassles with colour and flavour. In a worst-case scenario, farmers won't even have a product to market, stresses Coffin. A few years ago, millions of pounds of Prince Edward Island potatoes rotted in the very bins designed for their protection.

But, farmers can take steps to prevent storage rot, says David Best, a fieldsman for Maple Leaf Potatoes in southern Alberta. Like Cavendish in Prince Edward Island, Maple Leaf recommends producers plant quality seed with low levels of disease and follow sound agronomic practices.

Rotations alone will not stop storage rot diseases like pink rot and pythium leak because these pathogens live in the soil and can infect the tubers as they grow. Worse yet, producers will not necessarily see symptoms of the diseases at harvest and the fungus can spread in storage too. For a proactive approach to prevention, processors encourage their producers to apply Ridomil Gold Bravo early in the growing season, when the tubers are the size of nickels. Produced by Syngenta Crop Protection, it contains metalaxyl-m, which is the “only systemic product that is available to fight pink rot and pythium leak where it starts, in the field,” explains Harold Wright, a technical crop manager with Syngenta.

Early application is key, says Wright. Indeed, he and Coffin now tell farmers to treat the plants when the tubers are the size of dimes. It's a minor difference, “but we really want to emphasize the importance of applying early,” explains Wright.

In southern Alberta, Best has seen good control of pink rot and pythium leak with an application of the fungicide. Coffin says some Prince Edward Island growers are using two applications with even better results.

Storage smarts
While Ridomil Gold is the cornerstone of a good storage rot prevention program, growers must also focus on maintaining optimum temperature and relative humidity in storage, insists Coffin.

Whereas Canadian potato farmers tend to have decades of experience storing table and seed potatoes at temperatures in the three to four degrees C range (37 to 38 degrees F), processing potatoes need to be stored at 10 degrees C (50 degrees F). Moreover, east or west, they need bins with a relative humidity of 85 to 90 percent. To achieve that level, without encouraging rot conditions, Coffin says it is very important to dry the potatoes before they go into storage. Where that is not possible, he urges producers to take remedial action and use air circulation to dry the potatoes, after which relative humidity can be bumped to the appropriate range.

To monitor and mediate bin conditions, he also recommends a CO2 meter (appropriate readings would be in the 1000 to 2000 parts per million range), a dehumidifier to remove excess moisture and well-insulated doors to prevent condensation. “There's a high probability of minimizing your losses due to storage rot once you understand what you're dealing with,” says Coffin.

He further cautions against storing potatoes with physical damage. “Once that potato skin is broken numerous micro-organisms just come right on in for the party,” says Coffin.

Potatoes in storage are susceptible to pink rot if proactive strategies are not considered right from the spring to after harvest.

A pound-plus of cure
An ounce of storage rot prevention equals much more than a pound of cure, agrees potato grower Ian McGillivray, who views storage rot as a kind of management failure. “I don't think you can pinpoint the 'one' thing you have to do to make sure storage rot is not a problem. But if you don't make good management decisions throughout the whole production chain, you're going to have problems,” says McGillivray, who farms near Coaldale, Alberta.

His approach minimizes risk with action. In addition to harvesting around wet spots, McGillivray flags wet spots before top kill. If he has any concerns about disease, he also ships directly from field to processor. Other production choices, like careful bin sanitization and early season applications of Ridomil Gold Bravo, are management musts.

McGillivray's package approach works because it targets prevention versus control, adds Best. “The only time we see farmers get into trouble is when they cut corners. And that's fine, until you get caught. Then it could be the difference between a good crop — and no crop at all.” -30-

Spot checking your potato storage
Checking storage on a regular basis can help growers assess the crop's condition in storage. The following parameters will indicate to a grower that there is no storage rot in the potato bins. If one of the following conditions is off, the potatoes may be rotting and remedial action is warranted right away, says Coffin.

  • Carbon dioxide levels must be between 1000ppm to 2000ppm.
  • There should not be a smell of ammonia in storage, nor a lot of fruit flies present.
  • Potatoes should be dry and not leaking.
  • Relative humidity should be between 85 to 90 percent. -30-

Storing grains has always been a challenge, but with more growers opting to store more of their corn and wheat, they should not forget about the threat of spoilage from stored grain insects.

According to Dr. Art Schaafsma, with the Ridgetown Campus of the University of Guelph, both the spectrum and the severity of pest infestations in on-farm storage bins are on the rise. At present, Indian meal moth and rusty grain beetle are the main culprits in southern Ontario. As the climate seems to be warming, pests like the lesser grain borer are tending to move farther north and east and may enter Ontario. Grain lice and grain mites are becoming more of a nuisance, but not a major economic threat.

The Indian meal moth ranks as the first or second worst pest in storage bins across Ontario, and must be monitored to prevent damaged or rejected loads at the elevator. Photo Courtesy Of J. Andrew Welsman (PhD Candidate University of Guelph).

The more pressing concern is in dealing with the current pest challenges, including Indian meal moth and rusty grain beetle. These two trade positions as number one and two pests in Ontario, and feed on good grain. Finding one insect can prompt an elevator to reject an entire load of wheat or corn. “One of the things that we don't like about it is that it spins a web,” says Schaafsma, referring to the Indian meal moth. “It gets to its last stage and looks for a place to pupate and spins webbing, and you can have the top of the grain pile sewn together with webbing to about 10 to 12 inches. In a grain bin, it's an awful mess because grain falls from the top into the auger while unloading and the auger will plug.”

Other minor pests feed on either the bran and germ of cracked grain or grain dust. “But there's a whole host of insects that will go after grain that's in poor condition,” notes Schaafsma. All the more reason why proper storage of wheat is becoming such a huge issue. “The key is keeping things clean, everything has to be well cleaned: bins, especially with those aerated floors, grain handling and harvest equipment, and spills.”

Bins and the grain should be treated with Protect-It after they are cleaned and during loading. Products containing malathion are no longer recommended because meal moths are resistant to malathion. Protect-It, on the other hand, is made primarily of diatomaceous earth and scratches the waxy coating of an insect, causing dehydration and death.

Monitoring and early detection are key. Heat generation is one sign that infestation is occurring, and indicates the problem has progressed too far. At that point, preventative measures like Protect-It on its own are useless. Infestations must be detected before any heating occurs. One way to monitor important insects is to use a grain probe insect trap. When infestation is first noticed, rescue measures, such as turning grain and treating it with Protect-It or using a fumigant, are required. -30-

Canola producers can choose from a wide array of marketing options to ensure they get top dollar for their product. Frequent periods of tight profit margins have sharpened critical marketing skills, and many producers are far more sophisticated than they once were in choosing the right marketing strategy. As many canola producers have learned, marketing is an important way to manage risk.

“Many producers dislike the risks associated with marketing crops,” says Ian Morrison, Agricore marketing analyst in Winnipeg. “They come to us not only to manage risk, but also to protect themselves from huge price swings from year-to-year.”

If they sold their grain and the market rallies later, they still have the opportunity to benefit. It’s very low-cost, risk-free storage.

Sam Hartz, a grain and oilseed farmer near Spirit River, Alberta, says he uses the commodity market to ensure top dollar for his canola crop. “Marketing is half the battle. Get a good price and that’s profit,” he says. “Some of the big farmers are good at cash marketing. They sell a little bit of canola here and there to get the best price. They don’t use futures at all. I prefer to sell it all in the fall, get the money and pay the bills. I can buy it back on paper and play the futures if I think prices are going to go up.”

Hartz adds that his marketing system removes worry about his canola being 100 percent safe in the bin. “You don’t have to worry about it getting hot or maybe stolen,” he says.

Some farmers, however, depending on how comfortable they are with risk, may decide to trade futures. The first step is to open a trading account with a commodity brokerage house. This is similar to applying for a loan. The application requires information on income, net worth, size of operation, the types of crops produced and types of commodities to be hedged. The producer often meets with an account planner to discuss a business plan and trading objectives.

The canola market is often a good place to start since it tends to remain fairly stable and the producer can start small at 20, 40 or 60 tonnes. But Hartz says don’t expect to be right 100 percent of the time. “If you are 60 percent right, you’re making money.”

Meet your needs

Producers choose marketing strategies that best meet their needs. The use of futures and options are hedging choices that producers make when a deferred delivery contract isn’t as lucrative. Hedgers who are not comfortable with the margins required for a futures contract prefer options.

Margins in futures are usually referred to as a ‘performance bond’ which is only a small percentage of the full value of the contract. A small adverse move will create a margin call against a position. For example, if a producer has a sell position for a hedge and the market moves higher, the producer is subject to a margin call to make up the difference from the original price. If the canola is sold at $400 per tonne, and it went to $408 per tonne, the producer would receive a margin call for $8 per tonne.

Call options

If a producer has sold all the canola in the bin, and is concerned about missing a big price rally later on in the crop year, a ‘call option’ can be a good choice. Options don’t require margins. Instead, the producer is required to pay a small premium. A call gives the producer the right, but not the obligation, to buy canola when it hits a predetermined price. If the market never hits that price, the call option expires, and the producer is only out the amount of the premium.

A ‘put option’ is the opposite of a call. For a small premium, a put guarantees you the right to sell a product at a particular price.

Holding canola in the bin might be tempting in terms of playing the market, but it can end up costing you money. Morrison says, “On canola we usually associate five cents a bushel for storage per month. To justify holding it in the bin for four months, a grower should gain $0.20 on the earlier market price.”

The risk is the market may drop before you sell it, or the grade could deteriorate if weather conditions work against you. Storage cost is comprised of two figures: the amortized cost of the bin and the “opportunity” value associated with selling the grain today.

To calculate the opportunity cost, assume a 1000 bushel bin is holding $8000 worth of canola today. A month from now, the value is different because the market has changed. If you cashed in the opportunity for $8000 today, a 3.4 percent investment return in 120 days would make it worth an extra $92. However, if it paid off an eight percent agro-loan, it would make your banker happy and could save you about $212 in interest.

Now consider how a call option affects this scenario. A call option is a kind of insurance policy for selling today with an option to call later when the market is higher to claim that extra value. The cost of the premium will vary, but $0.25 a bushel for a four month option after delivery is fairly common. Call options are sold in 20 tonne units (880 bushels of canola for different lengths of time).

“Very few producers use the call option,” says Morrison. “But once they understand that it is very different from a futures contract or stock options, they see the real opportunity. It insures them. If they sold their grain and the market rallies later, they still have the opportunity to benefit. It’s very low-cost, risk-free storage.”

Call options can also come in handy when it’s time to approach a financial institution for an operating loan. “It’s a lot easier for bankers to look at secured risk. You have the opportunity to deliver at harvest for cash to pay down the loan, and you can stay in the market with an option to cash in when it goes up in the winter.

Marketing tools are available to keep the producer informed. Canola producers can manage risk and inform their decisions by taking advantage of opening calls, daily commentary on trading available on Internet sites as well as reports from local brokers. Ultimately, though, the producer can and should make the choices. -30-

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