A drop in marketing confidence might be more concerning than the market drop itself

(Paige Holmquist/RealAgriculture)

The results of the Canadian Farmer Sentiment Index for May 2023 have revealed a concerning trend of negative sentiment among farmers.

From financial performance to government support to crop marketing, there has been a noticeable slide towards pessimism. While the decline in market prices explains much of this sentiment, there are underlying factors that should raise additional concerns.

Examining the outlook on selling crops, it becomes apparent that optimism has waned since September 2022. Back then, the index stood at a robust 128, indicating farmers’ belief in a rising market (100 = neutral.) However, with each subsequent survey, the index has steadily decreased. In May 2023, it reached a worrisome 70, lower than the March reading of 74, the January reading of 90, and the November reading of 98. This decline aligns with the bearish market conditions, but it also highlights a larger issue: farmers’ confidence in their ability to market crops effectively.

In September 2022, despite the bullish outlook on market direction, farmers rated their confidence in marketing crops at a neutral 104. This confidence, similar to market sentiment, has consistently diminished over the months. This downward trend raises concerns about farmers’ struggles to navigate the current bearish market and effectively manage risk to maximize their margins.

Many farmers across Western and Eastern Canada, as well as the U.S., currently find themselves undersold compared to historical trends or the current market environment. In the Prairies, the cautionary approach could stem from the lingering impact of the catastrophic 2021 drought. Farmers who were proactive in their marketing but faced penalties due to production shortfalls are hesitant to repeat the same mistakes. Even in 2022, with improved moisture levels, farmers remained cautious. This caution and reluctance to sell, despite knowing they should have done so earlier, reflect the enduring impact of past hardships.

Interestingly, the Eastern Canadian farmers express even less confidence in marketing their crops compared to their counterparts in the West. The presence of a dry bias in Eastern Canada during the May survey period could partially explain this lack of confidence. However, the divide between the two regions indicates a broader discrepancy that warrants attention.

Notably, older farmers and larger farms exhibit higher confidence in crop marketing, likely due to their experience and ability to draw upon past market cycles. They have weathered fluctuations in the past, possess valuable knowledge and may have built themselves more margin for a poor year that younger farmers. However, this does not negate the overarching decline in confidence among farmers as a whole.

Want to join the Canadian Farmer Sentiment Index? 

Interestingly, on new crop sales, our May survey showed the more confident you are in your crop marketing strategy, the more new crop you have sold.  Take that stat for what you will.

Whether you believe a weather market will lead the commodity complex higher or the trend lower is just beginning, confidence in your marketing strategy is very important.  To me this is why the declining confidence in marketing is more concerning than the actual direction of the market right now, especially with farmers being light on sales given the current overall trend.

The current market environment demands a dynamic approach to crop marketing, with experts suggesting a “sell the bounces” strategy to chip away at price risk. The increased uncertainty coupled with declining confidence could significantly impact profitability unless farmers build a strategy to navigate the next six to eight months.

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