Home / Successful Farming / Farm Business / 3 ways to improve grain marketing results

3 ways to improve grain marketing results

09/08/2010 @ 4:03pm

"What happened to your projected seasonal rally in corn and soybeans?” asked a frustrated farmer from eastern Nebraska in early June. I told him that every year is different and that the late-June time period is usually a key time for a change of trend.

In 2008 and 2009, the late June corn and soybean sales were right near the high of the market, while early June 2010 appears to be a major potential low. This confirms one old trade rule: When something works for two years in a row, watch out because it will usually do the opposite in the third year.

The successful farmers I work with diversify how they sell their grain. Here are 3 different ways you, too, can find success in your marketing.

  1. Know who you get your market information and advice from. I encourage you to work with at least three different sources and to sell grain to at least three different companies. I suggest you follow your favorite adviser and make 80% of your sales following that adviser’s advice. However, I still see a lot of benefit in getting advice and analysis from three sources who are using different analysis methods. As stock investors who had all their money with Bernie Madoff found out or farmers who had 100% of their corn hedged with VeraSun, having everything with one person or one firm can really blindside you and create additional financial risk.
  2. Diversify when selling your grain. I encourage you to use at least three different risk-management methods. A combination of these 3 is even better: Buy the right crop revenue insurance for your farm. This becomes the foundation for a marketing plan; Use hedges or hedge-to-arrive contracts; and use puts. Younger farmers who have more debt and less storage will usually be more aggressive in hedging. Older farmers with big bins and deep pockets will sometimes pass up good new crop-selling opportunities. They will store their grain into the next year. They do not get the crop hedged on the summer weather scare rallies. Besides hedges, hedge-to-arrives, and puts, many elevators offer minimum price contracts or minimum/maximum contracts. Understand these different contracts and use the right combination for your farm.
  3. Understand why you make the grain marketing decisions you do. An old saying says farmers sell for one of two reasons: They need the money, or the crop is starting to smell. Seriously look at your decision-making process and understand why you sell. Take time to study this process if you want to improve your marketing and your bottom line. The best reason to sell is when prices have hit a price target that offers your farm an excellent profit level. This shows the importance of knowing your costs and being willing to sell grain on a disciplined scale-up marketing plan. You will often find yourself making the sale even when the news is bullish. The profit objective sale is one of the best reasons to make a grain sale. Another good reason to sell is when you have hit a price target and are selling at a major chart resistance level. You can also make sales based on time cycles. I have often made sales or purchase decisions using the time cycles I work with.

If you aren’t happy with the average selling price, a review of why you are selling your grain is one of the first steps to changing and improving your market decision-making process.

CancelPost Comment
MORE FROM more + No other content from this user
This container should display a .swf file. If not, you may need to upgrade your Flash player.
Ageless Iron TV: Tractors at War