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Let the marketing begin

Agriculture.com Staff 11/29/2006 @ 3:51pm

FORT DODGE, Iowa --As Wednesday's USA Today newspaper shows on the front page, U.S. farmers harvested a bumper soybean crop in 2006. Now the challenge of marketing that crop begins.

To help with those efforts, numerous marketing workshops will be held throughout the Midwest during the winter months.

On Tuesday, Ed Kordick, Iowa Farm Bureau (IFB) marketing specialist, presented a 'Winning the Game' workshop here focusing on post-harvest marketing strategies. Presenters from the IFB and Iowa State University told the large group of Iowa producers in attendance that storage is popular, but putting the crop in the bin is only half of their marketing decision.

"People have to have an exit strategy to help them in a disciplined way to move bushels to market," Kordick said. We raise bushels to eventually market them, not to just put them in storage. We need to be looking at pricing triggers or timing triggers to have us move the bushels to market."

With near record large corn yields and a record large soybean crop, an exit marketing strategy is a current dilemma producers face.

Dewayne Newell, a Calendar, Iowa, producer, said he tries to get the best of both marketing worlds by carrying some crop to May to reach the market high and forward contracts the balance of the crop.

"Figure out where your breakeven is, figure out how many cents above that where you'll start marketing. Then establish a base price, keep selling on an up market. And when it gets to a certain time of the year, make sure you have whatever percentage of crop sold that you want," Newell said.

John Frederickson, Gowrie, Iowa, producer, markets his own crop with skills learned through marketing workshops.

"Every year is a little different, that's why I come to these workshops," Frederickson said.

One of the differences this year for the Gowrie producer is working with ethanol plants for the first time.

"It makes us look out into the future, because the ethanol plant's price is set for when they want the corn to come in. So, we're changing when we normally deliver or sell grain, it's a different year," Frederickson said.

With three ethanol plants, and area elevators in the county, watching cash markets is becoming just as important as using futures contracts to market grain, Frederickson said.

TRAILINGSTOP

Meanwhile, one method that producers can use allowing discipline with a volatile market and upside potential is a 'trailing stop', Kordick said. In general, a trailing stop is a price that is set $0.25 or $0.30 below the market whichever direction it's heading.

"What's important is a tool to make sure that I have a price at least in mind that I can say, boy if it [market] gets down there, I'm going to make sure I take this on at least part of my bushels," Kordick said.

A trailing stop works well in the futures market, and should be studied a little more for the cash market, Kordick said. Meanwhile, producers agreed that the current high prices are good, but the future of production costs and margins are a concern.

"The producer's concern is not about the nearby future, but what do continued high prices mean for me as a producer? Short-term, high prices mean increased revenue. But, long-term how am I going to manage risk?" Kordick said.

EMOTIONAL TIMES

Because of high prices being offered on contracts so far in advance, when is the right time to market out into the future is a question producers are struggling with.

"There is price opportunity not only for this year's crop, but for next year's and the year after," Frederickson said. They are giving us these prices, and we have to ask is now the time to sell or should we wait a little longer?"

David Seil, a Gowrie, Iowa, producer, attending his second marketing workshop, agreed that managing emotions is his main priority.

"The hardest thing about marketing is watching prices move, and thinking is this it. Should I be jumping off here? That's emotional and I'm trying to get ahead of that with a plan," Seil said.

In the end, Kordick said what really matters is that if producers want to hold out for higher prices, that's fine, but to not let all the profits get away from them.

FORT DODGE, Iowa --As Wednesday's USA Today newspaper shows on the front page, U.S. farmers harvested a bumper soybean crop in 2006. Now the challenge of marketing that crop begins.

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