Risk vs Reward
February 26, 2018
“Often it’s not just about the yield. There are so many other important aspects to what makes a sunflower hybrid the right fit on a farm,” says Pokrzywinski.
When choosing a hybrid, producers may also want to consider the following:
- what processing facilities are within close proximity, such as oilseed crushing plants
- what grain types do the local elevators take
- the contract’s delivery period
- storage requirements
Typically, conoils and confections offer higher contract prices than other markets. However, higher contract prices usually means higher stakes, says Pokrzywinski. For example, meeting contract quality standards for the confection market, such as seed size and insect and disease damage, is often challenging. Thus, management of confection or conoil crops is different from oilseed sunflower crops.
The risk may be higher, says Parnow, but the reward is also higher. “The financial reward can be phenomenal. If you want to grow confection, you’ve got to have a few things going for you,” he says. For example, before committing to a higher risk crop, producers should consider their cash flow requirements and storage capabilities.
“People want that grand slam price with confections. That’s what they should shoot for. You may have to hold on to that crop for a while – it could be a year and a half. You’ve got to have good storage to hold a crop that long. Not everyone can do that.”
In fact, producers should match their contracts with the needs of their farming operations, taking cash flow requirements into consideration, says Parnow. And when it’s time to sign, read contracts thoroughly, he says. Always confirm your sunflower hybrid choice with your contract buyer or processor prior to seed purchase.
In terms of risk and reward, oilseeds are typically the easiest to grow and are the lowest risk, says Parnow; however, they also offer producers the lowest financial rewards of the three markets.
The bird food segment is also low risk but can provide excellent rewards, he says. This market segment can be aggressive in late summer, and the price can go up fast within a short timeframe, says Parnow.
Both the dehull and conoil markets offer excellent rewards at moderate risk to producers. However, no matter what market segment producers choose to enter, or what hybrids they choose to grow, quality is what matters most, says Parnow.