Why don't a lot of farmers use marketing tool options?
In a recent article, Agriculture Online highlighted the 'Winning the Game' marketing plan, created by the University of Minnesota Farm Management department, which is designed to help farmers become more profitable with their crops.
The 'Winning the Game' article focused on what is expected of farmers in developing their marketing plans.
There are a number of reasons why farmers do not consider a marketing plan as part of their risk management decisions. One of those reasons includes the fear of selling too early and missing out on a price hike.
Experts say thirty years of marketing research shows that 70% of the time, the high for the corn marketing year is between mid-February and mid-May. However, very few farmers sell 50% of their crop before harvest, according to Iowa State University Extension officials.
In addition, the number of farmers who don't use a plan to market their crop is surprisingly high, according to industry representatives.
Based on conversations with different elevator operators in Iowa, only between 10-15% of their customers participate in any kind of marketing plan.
By not working with a marketing plan, farmers are missing out on 30 to 40 cents per bushel on corn, and 50-cents per bushel on soybeans, one crop manager estimated.
To be clear, there are many different forms of marketing. Pricing the crop before it's planted or developing a post-harvest marketing plan before the harvest season are the kinds of marketing discussed. In other words, being forced to sell the crop straight off the combine does not require using marketing tool options.
Some farmers might consider marketing as sitting at the kitchen table calling around to area elevators for the best daily price, one market manager said. Yet, others consider pre-pricing just enough crops to make a mortgage payment by the time it's due.
Because a lot of farmers, for years, fed their crop to their livestock is one prevailing theme why farmers don't consistently market their crop with pre-price planning.
Larry Marek, an eastern Iowa farmer and a district Director of the Iowa Soybean Association, said that when everybody had livestock, grain marketing wasn't as important. "Now, with a lot of farmers becoming cash grain farmers, they need to develop the skills to market accordingly," Marek said. "A lot of farmers need to understand the different options of marketing."
Clint Rarick, an Iowa City, Iowa, farmer said (that) he doesn't dive into marketing grain because of emotional concerns. "I'm a nervous type, and risk is hard on my nerves," Rarick said. "Plus, I never really learned about it (marketing). That's why I don't do much of it." Rarick admitted that without any storage he opts to sell off the combine. When he does price his crop early, it's at the level of his insurance coverage. "Again, that's what I'm comfortable with," Rarick said.
Jeff Buresh, Amana Farms, crop manager, said that after five years of working with farmers on marketing, more are starting to learn it is crucial to their operation. "They are using some forward pricing, still not a lot, but some of the better marketers are selling 50 to 60% of their crop before it's in the bin," Buresh said. "Some of this grain is being priced long before harvest."