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Al Kluis: Fine-tune your marketing plan

Al Kluis 02/13/2011 @ 11:00pm

Anxiety levels are going up.  Even with the recent rally to $6 corn and $14+ soybeans, farmers are more worried than ever about cash rents, grain prices, and operating margins.

In 2006, my typical clients were farming 1,000 acres and grossing $675 per acre on corn and $525 per acre on soybeans. Their farms were grossing about $600,000 to bring $60,000 to the bottom line. Keep in mind that in the fall of 2006, farmers were collecting loan deficiency payments as part of their corn income.

Now, my typical clients are farming 1,500 acres of corn and soybeans. They’re right at $900 per acre on corn and $700 per acre on soybeans. They will gross $1.2 million to make $90,000. This is better than $60,000. But as you can see, the margins are getting thinner, and the risks are greater, as well.

If you take a 10% hit in yield or marketing, it is easy to slip into the red. Also, now when the prices go lower, you are not going to get an LDP to offset the lower price.

At the seminars and webinars I have been hosting over the last 30 days, farmers are saying how much scarier marketing is now than it was just five years ago. The numbers have gotten a lot bigger, and the margins for 2011 are getting much smaller.

You are in the critical 60-day time period when you need to make a lot of decisions that will impact your 2011 bottom line.

December 2011 CBOT Corn Weekly

4 Questions

Here are four questions you need to ask yourself when making your marketing plan for 2011.

1. What crop revenue insurance product should I purchase for my farm?

Work with a trusted insurance professional and select the right policy. You must choose the right policy for your farm at the right coverage level that protects your investment before the March 15 deadline.

2. How much of my crop should I get sold ahead?

You will want to get income protection on at least 60% of your 2011 crop by the end of June. I plan to have my clients get up to 80% of a conservative yield protected with a combination of hedges and puts.

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