Surveys have shown that most grain producers consider marketing to be among the most challenging tasks they face. Many would tell you that selling grain is a headache when prices are low and an even bigger headache, believe it or not, when prices are high — because then more money is on the line.

The grain producer in a bullish environment "can be like deer in the headlights," says Betsy Jensen, a marketing group coordinator with North-land Community Technical College's farm business management program in Thief River Falls, Minn.

If that's the case, there are a lot of entranced deer out on the highway now. Grain prices have risen significantly in the past year.

Mike Krueger, longtime vice president of Agri-Mark, who has started a new grain marketing service called The Money Farm, says that the biggest obstacle for grain prices since their free fall in 1997 has been world record crops — in fact, five record grain crops in a row.

But that has all changed.

Production "hiccups" are occurring, including adverse weather conditions in major wheat exporting countries. Australia will harvest a wheat crop estimated to be almost 60 percent less than last year, and the smallest crop since 1994-95. In fact, it's been reported that Australia may even need to import some wheat in 2002-03.

In Canada, a growing season plagued by weather problems has been compounded by a late harvest that is causing quality concerns. Kansas State University extension crop marketing specialist Bill Tierney estimates that as much as a third of Canada's harvested spring wheat crop will grade as feed this year, and much of the remainder will fall in the lower grades (No. 2, 3 and 4).

Here in the U.S., all wheat production this year totaled 1.62 billion bushels, which was down 17 percent from 2001 and was the lowest production since 1972, according to the USDA. Drought was widespread in many wheat-producing states, while too much moisture again plagued northwest Minnesota.

U.S. oat production this year was estimated at 119 million bushels, 2 percent above last year's record low 117 million bushels. U.S. barley production was estimated at 227 million bushels, lowest since 1937.

Wheat prices that bobbed along in the $2 range for several years now hover close to $5. "That doesn't mean prices still can't get cheap," Mr. Krueger cautions. "They can. That's just the psychology of the markets these days."

George Flaskerud, North Dakota State University extension crop marketing specialist, agrees; supplies can rebound quickly, he says. High wheat prices may bid more acres and production next year, which could push wheat futures back into the $3.50 range.

Mr. Krueger advises producers to consider forward contracting up to 25 percent of next year's production and use marketing strategies such as call options, which can help producers take advantage of price rallies after cash sales are made.

Ms. Jensen is advising grain producers to consider selling grain incrementally instead of trying to sell at the peak of the market. Cash flow needs, storage capacity and tax planning are all factors to be considered in making grain sales, says Ms. Jensen, who counsels grain producers "to find that line between greed and profit," however gray and fuzzy it may be.

Fortunately, grain producers now have a way to gain practical experience managing grain marketing price risk with futures, options and cash sales in a virtual environment, without any real financial risk.

The Montana Grain Growers Association and the Montana Cooperative Extension Service have developed an online grain marketing simulator called Commodity Challenge. (Heard of fantasy football? This might be described as fantasy grain marketing). Other cooperators in its development include the Minnesota Association of Wheat Growers and the University of Minnesota. Participation is free. All you need to play is access to the Internet.

Close to 600 grain producers in 24 states have started playing Commodity Challenge since it began in September, says Alex Offerdahl, coordinator of Montana MarketManager, the MGGA's marketing education program. Participants can even test their marketing skills against others, with standings updated daily. Mr. Offerdahl says a livestock version of Commodity Challenge begins in January. It can be found on the Commodity Challenge web site, www.commoditychallenge.com.

Commodity Challenge is grower association and university extension partnership at its best. It's a great idea and I hope as many producers as possible check it out before the program ends March 31, 2003. I also hope the program resumes again after the next growing season ends — there's still a lot of deer in the headlights out there.

Ag writer Tracy Sayler, headquartered in Fargo, N.D., can be found at tsayler@prairieagcomm.com.