A could've, should've season
In retrospect, the 2008 season that began with such promise has turned into one that may be remembered for its lost opportunities, where growers missed their chance to lock in higher prices months before the harvest.
September 24, 2008 By Saskatoon Star Phoenix
For grain producers, this may come to be known as the could have/should have year.
A growing season often has a defining attribute. This might be a big drought, a major frost or a bumper crop.
Overall in Saskatchewan, 2008 will be a year of average or a bit better than average crop production as well as crop quality. There were areas that suffered from lack of moisture, there has been isolated frost damage and there are areas with great crops, but this is just the normal variability.
Instead the major event common to a majority of producers has been missed opportunity.
On nearly every commodity, far better prices could have been locked in months before harvest started. This is true of canola, flax, field peas, oats, barley, canaryseed and most types of lentils.
It's also true on wheat sold through the Canadian Wheat Board. Through various CWB producer pricing options, much more attractive wheat prices were available earlier in the calendar year.
On Thursday, the CWB will release its new pool return outlook (PRO). The expected wheat price will no doubt fall in concert with what has been happening with American futures prices.
On some crops, prices can be set in advance of harvest and producers can still avoid the risk of being caught on the wrong side of the contract in the event of a crop failure. This is commonly referred to as an Act of God clause.
For instance, a producer could have locked in a price of $9 a bushel on field peas on the first 10 bushels per acre of production with an Act of God clause.
If the producer for some reason doesn't grow the 10 bushels per acre, he or she isn't obligated to fill the contract.
Under the Canadian Wheat Board's CashPlus program, $6.50 per bushel could be locked if for malting barley and some companies were allowing significant contract quantities per acre with no ramifications if you had a crop failure.
In other contracts, such as deferred delivery contracts on canola and oats, you're obligated to come up with product one way or another or buy your way out of the contract if prices have escalated.
While producers need to be careful with the risk and the type of contract they're signing, it was old-fashioned greed that prevented most of us from pre-pricing more of our grain.
When prices are rising, there's always the hope and expectation that prices after harvest will be just as good or maybe even better.
In 2007, pre-pricing crops was costly. Prices kept rising right though harvest and well into the New Year. After being burned the year before, little wonder that many producers were shy about locking in prices for 2008.
Of course, over the summer the bubble has burst on most commodities. While still attractive relative to a couple years ago, most prices are down dramatically.
Could have, should have is a common refrain.
It's also something you hear relative to hail insurance.
This is expected to be a record year for hail insurance payouts in
Saskatchewan. Claim numbers have been huge and producers on average purchased more hail insurance because grain prices were attractive and input costs high.
However, after getting pummelled by hail, you always wish you'd have bought more insurance.
While producers use various measures to determine how much hail insurance to purchase, a good guiding principle to grain pricing should be profitability.
We should worry less about getting the highest price and more about making sure that any prices we lock in provide a good profit margin.
This spring and summer, many producers passed up some very profitable prices.
Could have. Should have.