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Trading Thoughts: Sask. farmers and voters could learn about hedging their future

The latest Trading Thoughts column from Ron Walter.
TradingThoughts_withRonWalter
Trading Thoughts with Ron Walter

During this year’s Hometown Fair, Yours Truly met a farmer from northwest of Moose Jaw.

He was concerned that high commodity prices would be much lower by the time he harvested his crop   

At the time canola was selling for a mighty $27 a bushel.

He wanted that price but was afraid to hedge his crop.

The process of hedging with a commodities company involves getting today’s price in the fall and delivering the crop to that buyer.

This farmer was concerned his crop might not make the yield or grade in the hedging contract. If that happens, he would be responsible for making up the difference in grade or yield.

He would have been able to hedge part of his crop and obtain the benefit of the $27 bushel canola price on that portion of the crop.

I’m not sure why he didn’t hedge partially, or if he was greedy and wanted the high price for his whole crop.

In any event, he wasn’t going to hedge his crop.

Since then the canola price has fallen $10 a bushel to around $17 from $27. Hedging only 10 bushels on a 500-acre crop would have netted him an extra $50,000.

Agriculture extension staff have urged Saskatchewan farmers to learn how to hedge — to fix commodity prices before harvest — for 30 years, if not longer.

Slowly more farmers have taken the idea to heart and started hedging prices.

Grain companies used to overlook the contract deficiency when a farmer’s yield or grade didn’t meet the contract specs, but so many farmers in recent years are hedging their bets on grain prices that buyers have been enforcing contracts.

One solution would be to ensure an act of God clause in the contract and not hedging too large a portion of the crop.

While the farming community is slowly adopting the practice of hedging its bets on grain prices, Saskatchewan voters have a long way to go in hedging.

Overwhelmingly, Saskatchewan voters elect Conservative candidates.

It would make a lot of sense to elect a smattering of candidates from the other major federal party. That way Saskatchewan gives that party some hope of winning seats and the motivation to do better by the province.

Manitoba politics has hedged its political bets for generations. Even in staunchly right wing Alberta, a few Liberals are elected most elections giving that province a voice in the government caucus and in cabinet.

Saskatchewan has no voice in the government caucus or cabinet since Liberal Ralph Goodale was defeated. We are left on the outside looking in.

Occasionally a Liberal candidate makes the point that electing a Liberal would hedge our future with a voice in cabinet and caucus. Every time, the media and opposing politicians have pilloried them.

Given the strong initial support for Conservative Pierre Poilevre, it is unlikely Saskatchewan will hedge its politics.

Ron Walter can be reached at ronjoy@sasktel.net.    

The views expressed in this column are solely those of the author and do not necessarily reflect those of Moose Jaw Today, the Moose Jaw Express, its management, or its subsidiaries.

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