Episode Transcript
[00:00:22] Speaker A: Welcome back, folks, to the what the Future Years podcast. Thank you so much for tuning in. We are at episode number 18, just cruising right along. Of course, each and every episode is brought to you by John Deere and you know, folks, well, just huge buz coming out of commodity classic. Some beautiful new iron out there from John Deere. But out here in western Canada, we see a lot of different crop conditions. And our friends over at John Deere have a whole new lineup that can handle any crop in any condition. There's three new high horsepower nine rx tractors. There's that new high tech s seven combine, and of course, upgrades to the X nine. There's even a new c series air cart. Check them out for yourself, folks at John Deere, CA and see what's coming our way this year. I'm actually going to have someone from John Deere join the show in the next, I think next week if our calendars can align here to give us a little bit of insight at what's going on at John Deere and with all this new equipment. So I'm excited for that. Today's show is pretty packed.
I'm waiting for Mike Lee.
We're trying to connect here today to talk about the russian wheat crops. I don't know if you guys have seen lately, but a lot of chatter about the second largest russian wheat crop about to be produced here, and I want to talk to him about that.
So we might cut to Mike here if he can join into the show. Almost like a live join in. But anyways, we'll keep rolling or moving along here until we get him.
I had a good laugh last week or a couple of weeks ago when my mom joined the show, of course. Marlin, travel agent extraordinaire.
It was quiet. Nobody was submitting questions to get your name entered to potentially win a trip for two to Nashville. I'm going to draw for that around Easter, the way it's looking.
So anyways, it was super quiet, and then all of a sudden, the travel agent jumps on the show, and then boom, the questions start flooding in. So it's fantastic to see.
Now, for March, I'm trying to grow my email distribution list at the podcast. All right, I'm trying to grow that. That's the email that you get with the YouTube video, the show description, and also the podcast link is in there as well.
And I'm looking to grow that. So what I want to do for the month of March, we'll try to pull this off, but I want you to tell your friends, family, maybe it's folks that work on the farm with you. Maybe it's people you see in town at the coffee shop. Let them know about the podcast, have them go to the website. That's what thefuturespodcast ca if they sign up for the weekly newsletter, it's front page, front and center. You can't miss it. I'll email them and say, hey, how did you hear about the pod? How'd you hear about this? And if they say your name, you're going to get a double entry into the contest to potentially win a trip for two to Nashville, Tennessee. And they will also get entered to potentially win. So it's like three kind of entries. If you're planning on going together, it could be like three entries, but I want to give that a go. Maybe it's too complicated. Let's try for a week, see how it goes again. Tell your friends about the show, have them go to the website, sign up for the newsletter, and I'll email them and say, hey, how'd you hear about us? And if they say your name, everyone's getting entered for that trip to Nashville.
All right. Of course you can follow us all across all social media platforms. We're on x, we're on Facebook, Instagram, LinkedIn. Follow us all along there. Follow our journey.
I'm going to be on the road here. What the futures is on the road. Next week for two events, I'll be in Cameros, Alberta. Once again, that's Cameros two weeks in a row. But Herb with pioneer seeds, he invited me to come do a little bit of a talk. And the title of the talk is a little edgy.
It's SOb. Let's talk markets. And so I think it's been that type of year. So he was good with that. So we'll have some fun with that. And then Melissa with elite AG services, they're going to have me down in Lacombe on Thursday, and I'm going to talk all things markets there as well. So I'm cleaning up the slide deck and I'm investing in one of those clickers for some efficiency because it looks like I'll have quite a few more presentations here on the go. While I'm in Lacomb, I'm going to head over to Blind Man Brewery. We're doing a little collaboration on April 9. We're going to do what the futures beer.
Nothing big, just a fun little collaboration. And I'm going to go do some taste testing and figure out what type of beer I want to brew with them. So I'm going to do that while I'm out in Lacomb here next week.
All right? Of course, folks, the mailbag sponsored by pioneer Seeds. I'm going to tackle a couple of questions that came up and I'm going to try to get Daryl on the show here shortly with Connectsis credit union. He's going to help me tackle the hard financial questions for my hot topic. I'm going to talk about why does knowing your cost of production matter?
There's like an argument happening on X about knowing your cost of production, which is the weirdest argument that I can think of. The weirdest flex like to look at someone and say, you know your cost of production, what a fool you are. Doesn't that sound weird? You know what it costs to run your business?
Anyways, folks, I'll talk about that. Ag headlines, crop price updates, canola futures, folks, making a little run here. One month high as I'm recording on what day is it? Thursday, March 7. We're sitting on a one month high. We'll talk about that. Of course, we'll get to eating our veggies and we'll see if Mike can join the show here. We'll keep rolling and see if we can get him eventually. If I don't get him in this recording, I will add it towards the bottom end of the show. And so, of course it'll be in the show notes. You'll know if he's in here. But fingers crossed that we get Mike.
All right, positive moments. So let's get after it. Positive moments of the week.
Well, let it snow. Number one. Let it snow. Let it snow. Let it snow.
I believe yesterday, according to my wonderful new weather app with BAmwX called clarity, I was watching the snowfall accumulate here in southern Manitoba and make its way north. I don't think everyone necessarily received adequate moisture and adequate snow. And I know, folks, that you're not going to make the crop in March, but it feels good to get a little bit of snow. That's why it's a positive moment. I'm staring. I've got over a foot of snow now at our place. It's been -30 it feels like winter. It's fantastic. And even chatting with growers, there was a tiny sense of relief out there, a tiny bit. And again, not making the crop right now, but it showed us something here. And if you remember, if you go back to past episodes, the folks over at Bam, they told us, hey, guys, there's going to be a change here in pattern as we get into March, and if it was dry, look for it to potentially be wet. And by golly G into February it starts. And that patterns certainly evolved. So we'll see.
I've been a believer of a change in pattern here for the last number of months. I even saw this morning. I've been looking at all these long range forecasts from all sorts of folks, and it's not going to be perfect the way it looks, it's not going to be perfect, but precipitation looks to be at least in the cards for many this spring. All right, now, last thing with Bamwx, I had a tutorial yesterday with Alyssa because not, I'm not a genius when it comes to tech, as you can probably tell from the podcast, I need help. And so I met with Alyssa, and she showed me all the egg features in the platform.
But I also quickly had the ability to just check out the winter wheat belt in the US and just see the precipitation totals that had fallen there over the last day, couple days, week.
It was really nice to just go and say, hey, they got a half an inch there and they got a 10th of an inch there. It was, for me, from a crop marketing perspective, pretty powerful tool. So, anyways, I'll leave it at that for this week. Check them out. All right. My positive moment, my second one, and this is about as serious as I can get as a person.
And I do have a positive moment or positive way to end it. But our daughter, Eva, so my family. So we've got Eva, Willa, and Finn. Finn's a year old. Willa is just over three, and Eva would have turned five on March 3. Eva passed away shortly after delivery. After arriving to this wonderful earth, she left us much too soon, with no answers, no explanations.
We did all sorts of tests, and we did all sorts of.
My poor wife did all sorts of procedures to gather information. And at the end of it, it was a one in a billion scenario.
At first it was a one in a thousand, and then a one in 100,000, then one in a million. And then they said, well, we don't even know what happened. So complete devastation for our family and for losing Eva, our firstborn. And so why is this a positive moment for my week? Her birthday was on Sunday. Well, we celebrated Eva's birthday, and so we took the kids, we went to the dinosaur exhibit at the Mutart or the Muddart conservatory. I've been saying it wrong all these years. We hit up fox burger. It's a great burger joint in Edmonton, if you're ever in the area. And then we had ice cream at kind.
So the kids, while Willa had her ice cream.
Anyways, it was great.
So we had a nice time as a family and we celebrated her. We celebrated Eva in what we did.
When you lose a child and when you lose your first child in the manner that we did the journey to get back to a position to consider extending your family or trying for kids or having your partner, your wife go through that again, it's obviously tough. It's a tough journey to get back to feeling confident, to try to have kids again. And it involves a village of people, resources, counseling, family time, grief, stress, all of that comes into play. And so it's positive for me this week because I'm a lucky one. I'm one of the lucky ones with my family.
I have my family. And we were able to get to a position to have kids, and we have two healthy kids at home. And so celebrated Eva's birthday and we did it. We went through all that and still have been able to have this amazing little family. So I'm very grateful for that. And that's why it's my positive moment of the week.
All right, tough one to transition out of for me, but we'll keep going with the show. And if anyone out there has suffered from baby loss, I'm certainly an open book and an open door if you need to talk about that type of stuff, because it impacts a lot of folks, which we didn't know until after the fact.
All right, so let's switch gears now. Let's go to our next segment by Pioneer Seeds, which is our mailbag segment, of course. I just appreciate the folks at pioneer seeds stepping up and giving away this bag of canola seed every month. P 516 now, you can see it behind me on the screen.
Jacob and Becky have been great as well. And I'm going to tackle a couple of these questions, and then we're going to bring Darryl in to tackle some as well. I could fill up the entire, like, multiple shows now with trying to get answers to some of these questions.
And so I'm going to take two easy ones, and then we're going to have Daryl come in and join us for some of the tougher ones. All right.
He's the banker, so he gets the hard ones. So my first two, first one's from Matt Matapelt. All right.
And he says, ryan, love, the podcast was at your recent presentation to growers the other day talking about markets and outlook. My question for you would be, how to effectively capitalize on spring market rallies for the 2024 crop.
Besides setting targets, should we have any other strategies to forward contractor grain for off combine or later on? And so, Matt, this is a great question because it brings in multiple elements of what I've tried to speak about over the last couple of months, and I believe in our eating your veggie section. And maybe a couple of weeks ago, I asked farms to go and try to learn a new strategy, which it sounds kind of strange to say, go learn a new strategy. But if you went to your local grain elevator and said, hey, one of the issues I have for 2024, again, I'm just in parentheses. You're off to the grain elevator. Let's say I'm talking to Kirk, my buyer at Vitera and Melford. Kirk, if you're tuning in. Howdy. So if I went to Kirk and said, hey, Kirk, I'm looking at this market. We've been in a downtrend.
I anticipate a spring rally.
What do you have available to as, as a buyer with Vitera? What do you have available to me to help me get through this lack of confidence in forward contracting grain? I know that know sell grain and write up a contract, deferred delivery contract. I know I can have targets out there, but what else is available? Because I think as growers, we all have a comfort level when it comes to forward contracting. And it's changed after 2021, it changed. It could be that you may not want a forward contract at all. That's actually a pretty common one. Now, everyone wants the grain in the bin first.
Not the strategy I would deploy in 2024, but to each their own.
Some farms will say, I'm comfortable with x amount of tons or so many bushels per acre. Right. But let's dream for a moment, let's say that, well, today the russian wheat crop is expected to be the second largest crop on record, with potential to even still be record breaking because it's very early now, of course, it can also drop off. Right.
But let's say we have that. We have our own growing season, and all of a sudden, there's a dry spell that hits Russia for a couple of weeks, and that record crop starts to pull back.
The trade gets nervous about it, the market starts to climb, and spring week climbs a dollar, a dollar 50 in futures, and you're sitting here saying you've had some targets hit, you've got some contracts done, and you're done. You don't want to sell anymore. You're not comfortable, but your crops looking phenomenal. You've got across the prairies, across North America, northern Us, the crops are looking great. Corn crop looks great. In the US, everything's good. The only bullish thing out there is this little russian drought.
So you sit here and say, geez, my crop looks good. I would like to sell more. How do I do that? Well, this is the time, folks, to figure out those strategies. And you might sit here and say, I'm not forward contracting anymore, but yet these buyers have tools that you can implement. And so for my example for today, I would say there's obviously your comfort zone, but if you could go and say, hey, I'm going to look at selling additional bushels, maybe I'm buying a call option on those bushels that call option climbs. If futures climb and can be used, those funds, that money could be used to buy out a contract. It could have done it. It works.
So if you're sitting here this spring, you get to your comfort zone. Hopefully you push your comfort zone a little bit. Hopefully you're getting to the spot where you can push that a little bit, because we've been frozen since 2021 when it comes to forward contracting.
And then take a look at what you can do to safely extend sales further.
And maybe it's attaching a put to one of the contracts you already have. You can do that with companies where you say, hey, I don't want to sell you any more physical bushels, but I think futures are at a point where I want to lock in more. You can buy a put option and attach that to your contract over at Vitera. Now, folks, I'm not an expert in this, so you need to reach out to those folks and you need to reach out to the experts across the prairies. But in my mind, you need to harness, take advantage of whatever spring rallies come at you, because if it's not a western canadian drought, if it's not that, then this downtrend, in my opinion, continues into 2025 and into 2026 as well. A major disaster crop disaster, production disaster, changes. All that in a hurry in the US, or maybe it's Russia or somewhere in Europe.
But if we grow normal crops, this market's trending lower. And you need to take advantage of these spring rallies.
In one sense, there's a lot of things you can do. There's lots of different variety of contracts you can do, some averaging contracts, things like that.
There's lots of different things you can do out there, but you have to take that first step and make that phone call and say, hey, if I get to a point where I'm comfortable or my max for forward contracting what is available to me and take time to make that phone call right now. And also, my last note here, sell some 2025 crop as well. Half of you might fall off your chair after hearing that. But when you have a spring rally in 24, I would be focusing on 2025 as well and getting something done that far out. Okay. So, Matt, I hope that kind of helps a little bit. But for me, what I'll be looking at for our farm is pricing into these whatever rallies present themselves. Again, I don't know if we're going to get one or to what degree, but setting targets, pricing and targets might be physical targets out there. They might just be in my platform as well, where we track everything to say, let's watch for this price when it gets there. Let's make the phone call. And then from there, I'm going to try to push and extend sales and replace the risk, the buyout risk, with attaching call options. That's going to be my go to strategy for 2024.
Hopefully that helps. If not, ask me again, and I'll try a different answer next time. All right. The second question that I want to answer came from Keith Gadett out of that Hoa, Saskatchewan area. So just south of Prince Albert. And Keith was wondering about new crop oats. Will we have another opportunity to price new crop oats? And I believe his number was $5. Let me just see if I can double check.
And I think this is a great question.
There's a lot of confusion when it comes to what's going to be planted for oats, and how's that all going to look? So he says, will we get another chance to price oats? And I said, that's a good question. New crop or old crop? And he says, new crop. Okay, a couple of things. Number one, confusion around acres. Okay, so confusion around.
You've got someone saying that acres are going to be up 25, 27%. You got others saying acres are going to be up one, 2%. I just want to say, even if you do add 25% more acres, it's still one of the lowest acreage crops in nearby history in the last decade, and I don't believe we will. But even if you did add 25% of those acres, it's not a burdensome number from an acreage perspective. It's still on the low end of the scale. Okay. So that's just something to keep in mind. And so even if it's up a couple of percent. You don't have to sweat it a whole bunch. The other thing here is it's been such a quiet market.
Old crop, new crop, it's very quiet.
Oats are on the decline in sympathy with other crops, basically.
I talked, chatted with a few oat growers. There's not a lot of certainty on what they don't have. A lot contracted in most areas.
And I think oat acres are still very much in flux. I think that oat acres are not set. And the millers and the folks out there that buy these oats might be surprised when those oat acres aren't up nearly as much as what they want. So I don't think they've done any. With the exception of the OD offer in a few areas, they haven't done a great job of buying oat acres. And so I like oats in 2024. I think you can be consistent in your marketing with oats, but I'm not calling for, like, a screaming high rally unless we have a production issue. Okay. So what I'll say with the oats is that I do believe that you'll see some strength here as the realization comes to fruition that the oat acres aren't up nearly that 25%.
Yeah, not nearly that. And so you'll see a little bit of an appreciation in price, but we're also not going to get too bold up because market direction is lower. So, like in Alberta, for myself, again, in the high fours, right around the $5 level, I'm still pricing at that. If you can see that.
If you're north of $5 in southern Manitoba, 525, 550, I'd still be pricing that. And I know there's a lot of folks, a lot of doing much at 450 right now, to be honest.
450, act of God picked up on farm. Okay, maybe I take a look at that. But I do think you'll get a little bit of uptick in price yet again. Not to anything super exciting at this time, but more in regards to just getting back to close to those prices from a few months ago. All right, so I'd stay a little bit disciplined right now. I'd have some targets out. I think you should show those buyers where you would contract your oats at. Have that out there with confidence, and if that number hits, that'll be good and get after it. So we'll see you next time we have chuck on, or maybe somebody else will try to dive into oats a bit more. All right, folks, now let's bring in Daryl, to talk about some of these financial questions that came in.
All right, folks, welcome back to Daryl Kuzan from Kinexis Credit Union. Daryl, welcome back to the show. How is your week going?
[00:26:43] Speaker B: All right. Good week so far. It's Thursday, I guess one more day, the weekend. Beautiful weekend. Plus two or something like that around here, so that'll be nice.
[00:26:51] Speaker A: Yeah, you bet. It's nice to have winter again. Like, we've got lots of snow out now. It's been -30 so it's nice to have winter. But, yeah, I'll appreciate the warm temps again here, for sure.
So I know last week you won the doubles board at Curling.
How did you make out this week? What was going on at the St. Louis Curling club?
[00:27:13] Speaker B: Well, we lost our first match against your dad, so we lost.
It was a good one, though. And then we won the next one.
We set up a triple for my competition. So they got a triple out of it. So they got the doubles board. We didn't get it. So that was good.
[00:27:32] Speaker A: Well, you made them earn it, though, with the.
Yeah, you guys were harnessing your briar.
[00:27:38] Speaker B: Your team, sask, right here.
[00:27:42] Speaker A: Yeah. Good stuff.
So last time you were on the show, we're going to get t shirts made yet. But you said cash is king. Cash is king. Has that changed in the last couple of months?
[00:27:56] Speaker B: No. Cash will be key for the whole year. For sure.
It's going to be important to try to minimize your interest cost and your lines.
[00:28:06] Speaker A: You bet. Okay, so cash remains king. Okay.
I've been asking growers to send in questions. The mail bag sponsored by pioneer seeds. And I always tell farmers, send them in if I can't answer them. I'm going to invite the smart people onto the show to do that. That's why you're here, Darryl.
If we were playing, what was that game where you could phone a friend?
Yeah. So that's what I'm doing, phoning a friend on this one. And I've got three for you. Three. Okay. As my cat jumps on my back. All right, so first one comes from Keith. He farms in the Fort Saskatchewan area, but he talks about cost of production. So what is like a normal cost of production or what is considered too high? Do you have any thoughts around cost of production?
[00:29:05] Speaker B: Well, every area is different. We're in the north. I don't call it northeast Saskatchewan, I guess, not too far from the forest. But when you figure out the averages of what your input costs are versus your gross revenues and your labor power, machinery and your landed buildings, costs your input costs usually are around 30 35% of your gross margin or your gross revenues. Labor, power, machinery is roughly the same. So that would be your depreciation, labor, repairs, maintenance, the kind of the stuff that for operating your machines. Right. The input cost would be your fert, chem, seed, crop insurance, and then your landed buildings would be another 10%.
That leaves you 15% to 20% profit at the end of the year is what you're aiming for. So that's what your living allowance and principal payments on your mortgages and stuff like that, right?
[00:30:14] Speaker A: Yeah.
[00:30:15] Speaker B: So what's a high production cost?
What you should be doing is try to be efficient all the way through.
Try to use an agronomist and swell test to maybe maximize your fertilizer or minimize fertilizer cost to maximize your yields depending on range. You mentioned before, we were talking before the meeting about doing in crop fertilizer after the crops up. So you put a starter blend, go back after. If it rains, which I know some guys doing that that I deal with, they're putting it in. If it rains, they're going to put more nitrogen down. And if it doesn't, well, the crop is going to burn up, so why waste the nitrogen?
Same with labor, power, machinery.
Try to minimize your manpower, maintenance schedules on your equipment to minimize breakdowns during harvest seeding. Right. So you don't want to have a guy out in the middle of seeding in the field, a tech guy. Those are expensive, right?
[00:31:20] Speaker A: Yeah, they are.
[00:31:20] Speaker B: Be as efficient as possible. Don't say what should my production cost be? Just be efficient. You want to be efficient as much as you can.
[00:31:32] Speaker A: Do you have something else to add?
[00:31:34] Speaker B: Well, I was going to say the marketing guy, you want to maximize your income on your production, like your yield, right. So you want to maximize your price. So you got to know what your costs are so you can figure out where you're making money. That's where I was going to bring in your marketing history.
Marketing guy.
[00:31:57] Speaker A: Yeah. Well, when there's years like this one with wild price swings or declines of 20 or 30%, you start looking at all these. I wrote 30% down a couple of times here, and then you had another 30%, but a negative 30%. There's a lot of dollars floating around here.
I was in a room on Tuesday. There's like, I think they said just under 300 people in the room, majority farmers, and they put out survey about what your cost of production was going to look like here in 2024, like all in and the most popular by a long shot was under $550 an acre. And I don't chat with every farm across the prairies, that's for sure.
But my number is higher than that for the most part. So I think the under $550, I think that's a little bit of wishful thinking on their part. But I was surprised. I thought it would be around that 600 was my guess. But yeah, every area is different for these guys.
[00:33:12] Speaker B: Marketing the grain, knowing what their costs are at 550. Are they trying to lock in anything?
[00:33:19] Speaker A: No, I put it back to confidence. A lack of confidence, I would say, and a lack of.
I don't know if I want to say awareness, but I said this in the new year's episode or the Christmas episode. You have to forget and you have to move forward today. What's your plan today? Now moving forward, because we can't go back in time. It's not back to the future. That's not the name of the podcast.
It's just one of those things where I think people are lacking confidence and they're frozen. But I see Canola's on. I don't want to say a run, but you're sitting at a one month high here on the May contract and you start dusting it off. And the marketing plan, and we've encouraged folks to sell molt barley, sell oats, sell green, any green crop. Green peas, green lentils, yellow peas is another one. There are crops out there that make sense to market, and you shouldn't just be putting your head in the sand.
But the group is lacking confidence out there.
Next question for you, and this one.
I'll try to find the name here while you're answering. But what should one spend on machinery each year?
[00:34:48] Speaker B: That's a good one.
It would be nice to be able to buy a brand new piece of equipment every year.
[00:34:55] Speaker A: I'm going to edit that out and it's just going to say, buy brand new equipment every year.
[00:35:00] Speaker B: Okay.
Yeah. So that one's a tricky one.
Can you afford to buy that piece of equipment?
Talk to your advisor, your accountant, your bank, or your financial advisor. Don't talk to your salesperson because they're going to tell you you need one right away. So make sure that you can afford that piece of equipment. I know when I do my debt servicing ratios on the farmers, I do a five year average. So if you can't afford it based on a five year average, then what are your ods? You can afford it for the next five years. Because let's face it, these loans on these new piece equipment are usually seven to ten years long. So that's a long time to commit to a $30,000 payment on a tractor. Right. So better make sure you talk to your advisor or your accountant before you go and do something like that.
[00:35:56] Speaker A: Yeah, fair enough. Okay.
[00:35:59] Speaker B: Maximize your revenue per acre. And maybe you can afford a little bit more on equipment. But you got to have a good marketing plan and know your costs.
[00:36:07] Speaker A: And then reward yourself. Like getting a treat at the end of the hard work you've done. Go and buy that new piece of equipment with.
[00:36:15] Speaker B: Exactly. Yeah, for sure.
[00:36:19] Speaker A: All right, last one. And I think one of the most important. This is from Brad.
Optimal cash reserve. How long do we hold cash right now? Cash reserves. And what's the optimal cash reserve to have?
[00:36:37] Speaker B: Well, optimal cash is a tough one. You should hold as much as you can. When we do our analysis, we look at current ratio. So that would be your current assets and current liabilities. So your current assets would be grain on hand cash, prepaids, deferred checks at the end of the year. And compare that to your payables, leases, current portion of term debt. So you want to have a ratio of 1.25 to one. So for $100,000 of current liabilities, you'd want $125,000 minimum of current assets to pay for that for the year.
That's kind of where we want to baseline.
Ideally, you'd want to be 1.5 to 1.75. You'd be comfortable then if you got a bit of a wreck during the year, the crop is not super great.
You have enough insurance to cover off any shortfall. But you'd have enough cash to get you through till for the year. Right now you have cash right now. I wouldn't recommend prepaying down any mortgages, any equipment. Minimize your down payment on equipment if you can. If you're buying, because you don't know how much cash you're going to need to get to the end of the year. If you get to the end of the year and you got cash still sitting in the bank, you had a decent crop and you got good working capital going into 25, then yeah, let's look at paying some stuff down. But sure, cash is king. And if you don't have it, you're going to begging the banker for a re advance or an extension on something. And usually if you've had good history, the bank or the credit union will work with you. But yeah, it's always tough. You're better off. I'd rather not have to ask. And just have it handy.
[00:38:27] Speaker A: Yeah. And my thought is, I don't believe 2024 is going to be the hard year.
I think when we look back, it'll have its challenges for sure. But 25 and 26 could end up being the hard year. So if you have opportunity to keep some cash around to see what happens in 25, I don't think that's a bad strategy right now.
[00:38:54] Speaker B: Yeah, put in a term deposit. You can get term deposits, like, close to 5% right now. So that's pretty decent return on cash sitting there. Right. And then you're right, 24 should be a decent year. 25 will be all right because we'll have up here, 22 was a decent year, so our averages would be okay.
We have two more shitty years of yields, then 26. Insurance is going to be a little bit lacking, maybe. And then 26, I agree, is going to be the tough one, unless things change for weather and pricing over the next two years. But based on what we can see right now.
[00:39:31] Speaker A: Okay, well, that's what I have for questions today. Anything else that you want to add on that?
[00:39:36] Speaker B: Well, if you're an incorporated farm and you got a lot of cash, talk to your accountant. Because there's a ratio of cash versus assets that corporations can hold.
And if they're over that ratio, if there's death or something in the company and there's an issue there, the accountant knows best. There could be some issues with CRA, with taxes. If you got too much cash sitting on hand, so talk to your accountant.
If you got lots of cash on hand, talk to your accountant.
[00:40:13] Speaker A: All right, well, thanks again for joining us this week, Daryl. Good luck in curling playoffs. Sounds like you're building the right momentum there, which should be good to win. So perfect.
[00:40:25] Speaker B: Thanks for having me, Ryan.
[00:40:26] Speaker A: You bet. Take care.
[00:40:27] Speaker B: Yeah.
[00:40:30] Speaker A: All right, folks, always great to hear from Daryl Kuzamp connects his credit union. Just a show note here before we continue on with the hot topic of the week, Mike Lee. He, of course, these episodes are recorded in multiple parts, more often than not. And he pinged me as I was recording, and so I stepped away from the segment and we actually recorded basically about 40 minutes, 45 minutes of an episode on its own. So the Mike Lee episode, it might even drop before you hear me update you on it. But it was a great chat. So check it out. It's its own episode, and you'll find it in your email or in the catalog here as well.
All right, so let's keep moving on here. We're going to do the hot topic talk about futures and prices across the prairies here, just a little bit and wrap up the show.
So my hot topic for this week is, again, as I mentioned earlier, it's about cost of production. And why does it matter to know your cost of production? Again, it's just asinine that people are arguing about this on x. But anyways, I'll get into it here. But for us, what I'll say is knowing your cost of production is not the be all, end all when it comes to a marketing plan.
But for us, the reason that we have our cost of production up to date and available is to be able to respond to opportunities that present themselves.
So for us, we feel like if we're armed with that information and an opportunity for land or equipment or investment comes up, we at least have all that background work done and we can come up with an answer a little bit sooner in that process, or we can look at providing some early indication or guidance if we get that phone call or if that opportunity presents itself. And sometimes you kind of need that confidence in those discussions early on.
And you never know with body language and how folks are presenting you an opportunity, how things look immediately. And I know it sounds strange, folks, but I've seen opportunities here in 2024 or even in late 2023 where if you hesitated or if you waited a day, the opportunity was gone. So again, for us, that's one of the reasons. Number two is we like to analyze what I call our bottom feeders. So those pieces of land that may not be contributing to a positive margin, maybe it helps us make an equipment payment, or maybe there's some efficiencies gained by farming that land. That's up to you guys to figure out as well. But we want to know which quarters perform the worst and why. Have a discussion about why and see if there's any consistency with that. And so I had a client back in the day where we were farming some ground on what I would call a poor agreement with the landlord. And after three years of losses, and these losses were on good growing years where many or most of the other quarters were profitable, but it was basically three years of losses, and we could look at the rental agreement and it was pretty easy to figure out that this wasn't working. So at renewal time, we made an offer that made sense, and unfortunately, we did have to walk away.
But everyone survived. I'm sure someone else is farming that ground and probably looking to lose money here in 2024 if they're on that same type of agreement.
But if you're losing money on dirt, I think you have to kind of classify it as more of a hobby than anything. And golf is a hobby. But if you're losing money consistently on a piece of ground, wouldn't that be kind of classified as a hobby? Like, if it's not paying for itself, not contributing, I'd view it as a leisure activity. A leisure activity that gives you pleasure, basically. Right. So it's like golf, but golf is cheaper. Okay. So if you're losing money on a bunch of dirt because of support rental agreements, then maybe golf will be the way to go in the future. But anyways, knowing your cost, it's just a weird flex to go after someone for wanting to talk about knowing their cost of production.
So anyways, I'm going to use a sidebar here. So those of you that don't know your cost of production, you don't have to listen to this part for 30 seconds. But those of you that do know, I just want to mention that when it comes to marketing, knowing your cost of production can be powerful, but it can also have a negative influence on your marketing decisions. Okay, if you sit here and say, I need $17 a bushel to break even on canola, for example, that's your example.
I don't believe canola is getting the $17 this year. Okay, so if you sit here and say, I'm not doing anything until we see 17, that's not necessarily the approach you want to take. So it's part of your marketing plan, it's part of your business plan, but it's not the be all, end all when it comes to marketing decisions. I don't like to forward contract. As a general rule, I will not forward contract aggressively at a loss because lots of things can happen during the growing season. But as my crop comes to fruition, as things are looking stronger from a yield idea, then I'll start to reevaluate yield numbers, cost of production, and see if we can extend sales. Now, I still think we're in a bearish trend for the next couple of years, right? You're going to have opportunities, markets rally. But it's not the be all, end all with your cost of production, okay? It's just one tool. And for us, if we sit here today, for example, if that was our farm at $17 a bushel, we have to take a hard look on why we're growing canola. What can we do to cut our costs? What's available to us to lower that cost of production? Are we using an accurate yield estimate in there to start with, and if we are going to take on losses, where's that money going to come from for offsetting that loss? How are we going to get through to be able to plant a crop in 2025? All right, so again, folks, just a bit of a soapbox there for a few minutes, but anyways, get your cost of production figured out. If you have never done it or you haven't done it in a long time, just sit down and get some peace of mind here moving forward.
All right, futures moves. Futures moves. Crop prices. Let's eat our veggies and we'll wrap up. But futures moves. How are you guys liking the rally?
We've had like a couple of weeks now of a bounce of an upward momentum in canola futures. Soybean futures, not so much in spring wheat or Kansas, but corn has gained like twenty five cents. How are you guys liking this? Because this is the new reality here for the time being until we get some type of weather issue. This is a rally.
This is kind of it here until we get some weather on the way here or some weather challenges. So canola climbs about $30 a ton from the low and show notes. I usually start these a couple of days in advance, but here's what I wrote down. If I had a basis contract, what would I set targets at? And I put down 609 620.
And I put outside shot at 635. Pie in the sky, 609 triggered this morning. Before pulling back, I think we hit 610 on the May contract. So technically, if I had a basis contract at 610, I'm taking that under consideration for a bit of pricing.
620 should be my next level to consider. You can see, folks, these are not big, exciting targets.
Again, it's tough going. November. Canola traded as high as 623 here this morning.
625 to 640 is kind of that area that you can consider looking at some pricing. I think 650 off the knob needs a weather boost, and time will tell here. In short order, soybeans bouncing from that low of 1130 now up to 1170. It is down a dime here as of recording. And of course, I said corn gained twenty five cents up to four thirty five. Spring wheat trading in a 20 cent range, essentially, but it is still trending lower. And I'm still bearish spring wheat as of early March here based on a couple different things. But my big one right now is that russian export prices continue to decline.
And the, you know, those black sea wheat crops had a really nice, easy winter and coming out of dormancy in good shape. And if you want some depth on that though, listen to the Mike Lee episode. It's an absolute treat, but it's not bullish. If you just need the cole's notes, it's not bullish. All right, Kansas wheat also chopping sideways, continuing in a downtrend. Honestly folks, when it comes to wheat, you have to take a hard look in the mirror right now on potentially pricing some weed in short order. I know you're not going to like to hear that, but again, I've mentioned small incremental contracts, nothing big. But yeah, I don't like the set up on wheat at all at this time.
Okay, crop prices.
I'm trying to find something new that we haven't talked about in the last week or two from a price perspective.
I just got another barley update out of Lethbridge. And again it's lower, right? Another stretch lower. Now there are some elevator bids for feed barley for old crop, new crop.
A little bit of demand there, triggering some north of $5.05 and a bit prices.
But in Lethbridge it continues to decline down another $10 a ton here from just a couple of weeks ago. All right, again, folks, trying to find something different here. We're still wanting to price green crops.
Sorry, I'm just checking a note here on Faba beans.
Still waiting for a new crop. Fab of bean price for Robert. So I don't see it here, but old crop fab is trading around $12. All right, there's a pullback in CPS values in Saskatchewan. I'm reading here on the Ray Glenn update.
It's a great little update that comes out every week. But anyway, just scan that real quick. Nothing super exciting on the pricing perspective, I guess. You know what I should mention here for canola, some of the crush plants are getting good traction for May and for late July and August. So you know how sometimes you capture those premiums to deliver in months where others don't really want to deliver? And this is part of eating your veggies as well. It'll transition here. But I noticed a little bit of opportunity in Alberta for April, May, so that little bit of a premium to grab that basis. Same thing with August. But I'm also seeing the sold out signs now for some crushers for May and for August. So mission accomplished. Offered a little premium, get filled. Right? So just hypothetical folks, right? But think about this export demand, it's a little bit better, but it's not fantastic. Okay? So you can rely on your line companies to offer some types of premiums here to get some bushels but like in Melford, for our farm, we sold some $13 canola in February. It's $13 for April. So it's long gone. Right. And delivered anyways. So just think about this for a sec, though. Your crush plants in some areas are full for May, okay, so April is covered. May is covered. Now you've got June and July. Okay, June and July have space, but the price isn't as good. August also filled. You get to May. Maybe you get April showers first, and then you get planting in May. And what happens is people plant a crop, they see it germinate, get some moisture, we're off to the races. Long range forecast looks decent. They start to dump and sell that crop. Okay, remember, we're going to attempt to carry over the second, 3rd, 4th highest canola carryover in the three, somewhere in the 3 million ton range. Three to four in there, in between there, okay, that's the second, 3rd, 4th highest ever. So some of you have to carry your canola over. And this is why. Because when you get to May and you're like, hey, my crop looks good. Now I'm going to unload. Well, June and July, you better be ahead of everybody else because the delivery opportunities are going to be slim at your crush plants for June and July. Everyone's going to try to dump, fill those facilities up. And then some of you will be forced to carry over unless your line company steps up with an offer. So I told you last week, folks, I don't like basis contracts. But in canola, you almost need to buy your space and commit to your space. Otherwise, you may be one of those lucky farms, carrying canola over in a downward trending market where soybeans and canola are expected to drop another dollar a bushel, okay, don't be that farm.
Let's say it together. Let's not carry canola over into 2025 or old crop into new crop. Let's not do it. Let's not carry 23 crop over.
All right. Eating your veggies. So much to work on right now, but a couple of key ones. Okay, number one, fertilizer.
James Mitchell will join us again in the next couple of weeks. But fertilizer, you've seen a big spike in urea and foss. If you have not committed, it's about to get ugly for you. Okay, if you sit here and say, ryan, I'm not putting any foss down, well, then, okay, don't worry about it.
But if you are sitting here saying, yeah, I'm going to buy some fertilizer, it's going to get ugly for you here. It does this time of year, each and every year, right? It's going to get ugly for you. Get your fertilizer booked. Don't mess around. Otherwise, you're just going to pay more money for it. Okay? You're just going to pay more canola basis we already talked about. But set your targets, folks. Like, if you are going to commit to a basis, get a target out there against it again. If you're going to do 100 ton, I don't care if you do 520 ton targets, but get something priced. This is your rally. Your rally is happening right now. Your first little rally is happening. It sucks. It's not fun. But this is your environment for this time. Okay? And I also want you to consider a new crop canola sale. If you have nothing done for new crop again, what's our rule? Small increments, right? Not going whole hog. But I'd like to get something done there, and I know I got to look at wheat a little closely, more closely and get something figured out for wheat as well. You're selling your green crops, green lentils, green peas, sell some of those. If you're a farm with four or five different crops that you're growing. Malt, barley, lentils, peas, whatever it is, you should have some of that priced already. Lentils should have something priced malt barley. Have something priced peas. Please price something flax. There's lots of crops out there. You can start figuring out your crop marketing plan here for 2024 and beyond. All right, folks, that's it for eating your veggies for this week. Thank you for tuning into this week's show, folks. This is a wrap up. Mike Lee is a separate episode. Check that one out as well. And I'll be back next week with a whole bunch of nonsense here once again. So have a great weekend. Or actually, I don't even know when this is going out, so have a great day. Whenever you listen to this. And I'm out close.
