FARMING YOUR MONEY | WHERE ARE THE BROKERS?
Where are the brokers? I have spoken about the commodity price boom that has the potential to add massive revenue to grain farms across Western Canada. The current and future prices look very promising. Now we need to have a commodity in order to enjoy the commodity price. Hopefully Mother Nature will bless us with a crop.
Paul Kuntz Paul Kuntz is the owner of Wheatland Financial. He offers financial consulting and debt broker services. Kuntz is also an advisor with Global Ag Risk Solutions. He can be reached through wheatlandfinancial.ca.
These high commodity prices have farmers wondering what this will do to expenses. Oftentimes we see expenses go up when revenue goes up. This can outstrip any benefits the rise in prices brings. It has led to me to wonder if we need a better system. Farmers have the ability to lock in grain prices on certain commodities for up to two years. You can lock in this crop and next year’s crop price. To go out to the second year might take some planning. Your local elevator may not have a specific deferred deliver contract for a crop two years out but if you use a commodity broker, you can use the futures market to protect a price. You will be limited to what is traded. If you want to protect durum wheat, there is no contract for that. Same with barley, peas, lentils and others. You can protect wheat and canola. When it comes to protecting your expenses, there are options. Farmers often pre-buy their fertilizer long before planting and typically save money. This year it saved a large amount of money. Fertilizer prices right at planting time in 2021 are very high. If you purchased later in 2020 or in early in 2021, there were great savings. But what about 2022? What will fertilizer prices be? If you have the storage and money, you can start buying fertilizer as soon as the price drops. But what if the price does not drop? What if the fertilizer prices for 2022 simply remain high? It would have been nice to have a system to lock the price in late 2020 for 2022 and beyond.
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