Online Marketing Tool Tracks Returns
We all know that any of last year's grain still in bins, if it wasn't hedged or sold, has been losing value for much of the winter. Troubles in Ukraine sparked a spring rally in futures, but the value of the unplanted 2014 crop is uncertain. Yet, farmers have plenty of tools to manage some of that risk – crop insurance, options, futures, and cash sales.
Until recently, it wasn't easy to know the effect of all those decisions on your bottom line, however. Now you can, at no cost, with an on-line tool called AgYield. A screen shot of the tool's dashboard appears on this page.
Four windows in the dashboard take you to different ways to view your revenue.
The account summary estimates the value of your unsold grain and all of your approaches to marketing it. Futures prices are adjusted each day with the previous day's close, and unsold bushels change with the basis pulled from a 150-mile radius. (For a $20 monthly fee, you can have quotes from buyers of your choice fed into the program.) You can set up the accounts by different entities and crops in order to drill down further into profitability.
A hedges snapshot shows how you've allocated different marketing strategies. An estimated return chart is a historical look at returns. And the forecast matrix is the heart of the program. That's where you can test different marketing strategies combined with crop insurance. Or you can select just one approach to see how it performs at different levels of price and yield – which you can also adjust.
"We've been putting everything in there," says Scott Friestead, who raises corn and soybeans with his father in Kendall County, Illinois. "If we sell grain, it goes in there. If we sell futures, it goes in there. We've done some options trading. When you sell options, it shows you where the risk will be in a year when the market takes off, like in 2012."
Friestead and his father have been using options for years but selling them only in a limited way because of the margin call risk you face once those options are in the money. They've been able to be more aggressive by using the AgYield, which was introduced in 2012. Now they can see in the matrix how an options sales strategy will make or lose money at different price levels and yields.
"Without this, we couldn't be doing the marketing we're doing because it takes out the unknown," Friestead says.
AgYield isn't the only online tool for analyzing your marketing performance. Brokerage firms and crop insurance agents have developed or use other proprietary tools. Friestead has tried some others, but he finds AgYield more flexible.
If AgYield is free, is there a catch?
No. If you like working with online decision tools, it should work well for you. But like many free Internet services, you can pay for enhacements. The online tool was developed for Iowa Grain Company, which for $150 a month offers consulting on marketing and crop insurance and will help manage AgYield for you, says Chris Beavers, director of business development for AgYield. If you're using the consulting service and you sell grain at your local elevator, you can call AgYield. "That sale you just made will be reflected in your account, and you san see where you stand as a result," Beavers says.