With the August 12th WASDE report in the rearview mirror, we’ve fielded questions about what to expect going forward. Everything from “where is the market headed?” to “What should I do now?” The report caught people by surprise. Our team would never have believed that estimated corn production would increase, even if just slightly.
As we have thought about this situation, we can’t help but think that this major reversal in the corn market highlights the importance of having a good grain marketing plan. In our GROW magazine last winter, we highlighted 10 tips for a strong marketing plan. Seven of these are from the American Bankers Association. We added three more.
- Know your break-even costs. This is number 1 for a reason. I have likened it to the manufacturing business that doesn’t know what it costs to produce the item they are selling. How can they know when to sell if they don’t know what it cost to produce the item?
- When there’s an opportunity to profit, act on it. You may not hit the high of the market, but if you can reduce your risks and take some profit at the same time, you’re headed the right way.
- Set a goal and stick to it. A simple plan is always better than no plan. I recently heard a good plan: Every time you do something agronomically, sell some grain. Spring prep? Sell some grain. Spreading fertilizer? Sell some grain. Ordering or planting seed? Sell some grain.
- Take the emotions out of it. Our averaging contracts are a non-emotional way to get some new crop sold, and it looks like they will beat the harvest market price again this year.
- Keep things simple. Some of the best contracting alternatives we offer are the easiest to understand and initiate. A Cash Sale or Forward Sale works well when you follow #1 and #2.
- Avoid spot markets. Waiting until you need cash to make a payment generally isn’t the best time to sell grain in the long run. I had a farmer tell me recently that their operation never brings anything to town without having made a sale first, and usually months before delivery.
- Understand the tools available. Don’t be afraid to ask questions. If needed, start small with an alternative that is new to you, just to learn more about the process and how it works.
- Remember why you built grain bins. Bins should be built to take advantage of the carry in the market. By making a sale for 90 to 120 days after harvest, you will generally be locking-in a favorable price.
- Keep cash flow needs in mind. Focus your sales on those times in the calendar year that you will need an influx of cash.
- Designate someone to be responsible for marketing grain. With everything the farming operation has to accomplish to grow a crop and market it, the tasks can be overwhelming for one person to do all of them successfully.
To wrap up this article, I’d suggest that if you haven’t sold as much new crop as you would like to, and you don’t want to pay commercial storage, make an appointment with your local GMA prior to harvest, to learn about at least one of our marketing alternatives. Our full list can be found here.