Your Profit: How to build a marketing plan
"The corn and soybean crops are in the bin, now what do I do?" was the question that came in at a Webinar from a farmer in eastern Missouri this fall. I had a series of questions for him that I will share with you as you continue to build your 2009 crop marketing plan.
With the crops that you sold ahead and the crops you have in the bin, what is the value of your 2009 crop?
This is what I call looking at the total crop revenue. Did you generate enough income to pay all of your bills and still bring 10% to 25% of the revenue to the bottom line? If so, it is a good time to make some incremental sales. If no, you need to know what revenue number you need to get to. This is an individual decision that will vary with every farm.
Is the crop in your own bins? Or is it in commercial storage?
It is a lot easier to justify holding onto cash corn and possibly soybeans if the crop is in your own bins and you are not paying a monthly storage bill to hold your crops into next spring and summer.
Is the market paying you to hold (carry) the crop?
The answer for most of you is that the corn market is paying you to carry/hold your inventory into the spring and summer. With soybeans, the longer you store, the lower your bid. So if you need to generate income and understand merchandising, then getting your cash soybeans sold or some portion of them is the right decision.
What is your current basis vs. the historic basis for your area?
Because Successful Farming readers stretch from New York to California and Minnesota to Texas, I cannot give an answer that works for everyone. In general, the current basis level for Corn Belt readers is good enough to get 40% to 60% of the cash soybeans sold, while corn basis levels are wide. This is usually not a good time to be selling cash corn.
When do you need the money out of the crop?
If your operating note is paid off and you have enough in your checking account to make your land and rent payments, then you can afford to wait for higher prices. If you have a large operating note and have large land and rent payments due in 2010, then turning some or your entire 2009 crop in to cash is the right financial decision, even if you give up some upside if prices rally. I encourage you to find a way to hold at least some of the corn and soybeans in the bin or on paper into the spring of 2010.
What is your monthly interest bill at the bank?
Farmers who have large interest bills have a difficult time making a good bottom-line profit. Getting your cash crops sold and reducing or eliminating debt are often the right financial decisions.