Data shows that farms in the top 20 percent of profitability are better at grain marketing and risk management. With prices projected to not change dramatically in 2017, we compiled thoughts from across the industry on future marketing tips strategies.1. Start with the basics. It’s simple economics of supply and demand. The USDA World Agricultural Supply and Demand Estimates Report (WASDE) are released monthly, the latest being November 9, with the next on December 9. The reports can be found at http://www.usda.gov/oce/commodity/wasde/index.htm. The reports can be lengthy, but a quick Google search on the day of their releases can turn up decent news summaries of their effect on the markets.
2. Think globally. Today, the weather in Brazil plays as much an impact on prices as the weather in your backyard. Global weather, politics (especially those involving trade) and economics all shape the prices we wake up to see every day. In th September issue of Successful Farming, commodity trader, Al Kluis, noted that the Chicago Board of Trade is not the center of the grain-pricing universe as it once was. He daily keepins an eye on the Dalian exchange out of Dalian China, the Matif exchange in France and overnight Globex activity reported by the CBOT.
3. Calculate your margins. An effective marketing strategy starts with a complete understanding of your input costs, hauling costs, and what prices you need to see to break even. In the article "Record yields boost income potential" in the Iowa Soybean eWeekly states that the Iowa State University (ISU Exention and Outreach) annually estimate break-even costs this year for Iowa farmers based on average fixed and variable costs for land, seed, fertilizer machinery and labor and then projected based on trend-line yield estimates. They estimated break-even costs of $10.37-$10.79 per bushel for herbicide-tolerant soybeans following corn, and $3.91-$4.93 per bushel for corn following soybeans. These costs obviously would fluctuate based on your individual operation, but for example sake, these costs indicate that market prices this week allow producers to sell at a gain. In addition, the article stated that many Iowa farmers also found that they had higher yields this year than what was used in the break-even estimates, which boosted their income potential.
4. Treat grain storage as a marketing tool. A customer once told us, “the two worst reasons to sell grain are because you don’t have money or you don’t have storage.” Grain bins and grain siloes are more than a means to an end, but can be a valuable tools in helping individual farm operations store grain safely to capture market peaks at different times of the year. Typically, April, May and June see a spike, just like we saw this year. Monitoring and automated grain management technology is available to help retain quality standards for sale into the spring and summer.
5. Get high-quality grain in the hands of those that want it. Andrew Hoelscher, President of Farm Strategy Consultants in Ellsworth, KS, emphasizes that grain is at its highest-quality at the farm. But go-to-market practices and politics often dilute that quality and result in cheaper prices being paid to the farmer than what the grain is actually worth. He works as a merchandiser to make direct connections and transfer of product from producer to buyer (processor, co-op or other) to ensure good grain is in the hands of those who need it and the price paid reflects that. Tools for these types of direct connections are also available.
6. Know your options. What if you learned that if you drove 25 miles further, you could get 50 cents/bu more than what a local elevator is offering? The difference in overall return may offset the extra time and fuel. Tools like CashBidManager are opening up opportunities to look at what market options are around you and evaluate what may be the most profitable option, even if it’s not closest to home. In the mid-November issue of Top Producer, Jessica Groskopf of the University of Nebraska Extension & Outreach emphasizes that especially in times of high grain inventories, farmers need to have a written marketing plan with price and date goals, and a system to remind or alert when grain is at target and it’s time to pull the trigger.
7. Time is of the essence. Market analyst and publisher of the daily Van Trump Report, Kevin Van Trump, joked at IntelliFarms Tech Summit this year that, “Before, the market could move 30 cents in a year. Now, you can go to lunch and come back and it's moved 30 cents!" It can be difficult to transition to a grain selling mindset from a harvest mindset, but grain market educator, Ray Jenkins of ISU Extension, urges vigilance during this time of year as prices fluctuate, even in unanticipated times. In an article in the mid-November issue of Top Producer he predicted that there will be price bump the last 6 weeks of the calendar year, with processors running 24/7 beore they close for the Christmas and New Year holidays. Our advice: be vigilant for quick market shifts and be nimble and operationally ready to deliver.
8. Build a resource library. Understand where your capabilities end, and surround yourself with individuals and resources that can help take you to the level. Trusted consultants can be invaluable, and there are many other industry experts that make their perspectives accessible online. The Van Trump Report delivers detailed updates daily on market movements, and analyzes the implications of global trends on American farms. Economics and grain marketing experts at Iowa State University have published a whole video library for grain marketing basics that is worth checking out.
9. Control your emotions. Uncertain times like these produce worry and fear, especially for those who may not have farmed through rough times like the 80s. According to Greogry Berns, a neuroscientist at Emory University, when the fear system of the brain is active, it shuts down exploratory activity. To neutralize, he advocates avoiding overly pessimistic people and even media. He says that you should still be prepared for change and challenge, but cautions against being hyper-vigilant to the point that your fear is debilitating and you miss out on opportunities when they arise
10. Think ahead. In the short-term, it’s already being reported that many plan to switch to more soybean acres instead of corn due to higher margins. But looking beyond just next season, it's worth noting that not all commodity markets are suffering. Organic demand continues to grow, pulse crops are flourishing and ongoing research in biofuels indicate promise for other alternative crops. It may be worth taking a step back to evaluate what other options would be a fit for your operation, and allow diversification to help you weather the volatile times.
*Disclaimer: The content of this article should not be construed as an offer or recommendation for specific selling, buying or investing actions or decisions.
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