MCP’s average price pool

Until May 15, 2009, Mid Columbia Producers is allowing farmers to put wheat into this year’s average price pool. When a farmer enters wheat into the pool, he selects an ending date between August 19, 2009 and February 28, 2010. MCP’s pool manager then divides the amount of wheat by the number of weeks between May 20, 2009 and the ending date selected and sells an equal amount of wheat each Wednesday using the price MCP is then offering for the ending date.

I always use MCP average price pools to market some of my wheat. For the 2008 crop, the average price pool (ending October 15, 2008) returned a Portland WW price of $8.45 per bushel. In 2007, 2006, and 2005, the prices I received for wheat entered in the average price pool were $6.44, $4.25, and $3.72, respectively. Last year, for the first time, MCP also offered a “high-risk” pool that it managed. The return on the managed pool (for an October 15, 2008 ending date) was $8.71 per bushel — 28 cents more than the average price pool.

I believe farmers should seriously consider putting 10-30% of their wheat in the average price pool. The pool is most attractive when prices in the spring are “high” (as they were in 2008). This year, predicting the direction of wheat prices is more difficult, but plausible arguments can be made that WW prices could be lower at harvest and during the early fall. I regret that this year’s average price pool didn’t start earlier. If prices decline at harvest, I’ll wish I had more $5.70 spring sales in the average.

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