GrainCents calculates the accuracy of our sales recommendations on a quarterly basis, in the interests of continuous improvement.
If within 60 days, the price does not increase by more than 4% from when we made the sale, we consider that to be the right call.
Conversely, if the price reaches higher than 4% of the price at the date of sale within 60 days, we consider that to be ‘the wrong call’.
Why Does GrainCents Care About 60 Days?
Historically, price trends tend to last for about 45 to 60 days. Locking in sales within this timeframe helps us manage cash flow, as well as manage our risk exposure.
Why Does GrainCents Benchmark Off 4%?
Typically, grain prices shift by roughly 1% every two weeks.
Therefore, our target needs to be higher than the peaks and lows of weekly price movements.
However, we know farm profit margins are tighter than ever. That’s why we use a benchmark of 4% of the price at the sale (some analysts may use 5%, but here at GrainCents, we aim to be a little more precise than your average grain marketer!)
For example, we made a call to sell winter wheat on January 31. The front-month contract for Chicago Soft Red Winter Wheat at the time of the call was $4.52. Therefore, our benchmark for that call was $4.70 (4.52 x 1.04). Unfortunately, on March 1st, 2018, that same contract closed at $5.16, well above our benchmark, and so this was a ‘wrong call’.
Conversely, on January 24th, we made a call to sell soybeans off the January ‘19 contract. At the time of the sale, the Jan’19 soybean contract closed at $10.14 USD/bushel. Therefore, our benchmark price for that call was $10.54 (10.14 x 1.04). Within the next 60 days, the contract reached a high of $10.48 on March 6th. Since this is below our benchmark price of $10.54, we considered that call to be ‘right’.
But what about those crops that don’t have a futures market?
Many of the GrainCents crops (like barley, flax, pulses, and others) aren’t traded on the futures markets and therefore have limited price transparency.
In these instances, we turn to the FarmLead Marketplace to see where these crops are trading.
To establish our benchmark prices, we use the following price points:
– For malt barley, we use the average cash grain price in the Golden Triangle and Great Falls, as published by the USDA.
– For all other non-futures crops (oats, yellow peas, green peas, chickpeas, feed barley, flax, durum, and lentils), we use cash grain prices in Saskatchewan, as published by Saskatchewan Agriculture.
How Did our Grain Sales Recommendations Perform?
As any grain marketer can tell you, 2018 has been a difficult year.
Volatility has been the main theme of the grain complex since the infamous ‘Trade War’ began making headlines back in March. Considering the fundamentals like supply and demand, grain prices in 2018 have been irrational indeed.
GrainCents editors are some pretty smart folks, but even we couldn’t foresee the extreme volatility in 2018 grain prices. Despite our exclusive access to specialty price points on the FarmLead Marketplace, the accuracy of our calls has decreased during these irrational times.
Put more concretely, while we may be good at predicting grain markets, we couldn’t predict what Donald Trump would do next.)
Our accuracy rating for the first half of 2018 (January-June) is 81%: we had 26 right calls out of 32 total calls.
This puts our accuracy over the last 2.5 years at a total of 88.4% correct, down slightly from the 93% before entering the 2018 calendar year.
You can view our entire call history here:
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