ABCs of Grain Marketing Planning
New Year’s Day has come and gone. The excitement of the holiday season is history.
If your farm is like mine, planning for 2017 takes the place of fieldwork in my agenda. Keeping the planning for the 2017 new crop requires careful attention.
For instance, focus on the details of following grid sampling instructions on land that will require evaluating the effectiveness of pesticides on resistant plants and animals.
January also is a time for making marketing plans for selling the old crop that is in storage and the new crop that is still in the seed container. When all factors are considered, most farmers probably enjoy writing their marketing plans less than they find pleasure in the husbandry of growing the crop. I will share some ideas I have gleaned from 38 years of selling soybeans and corn that just might make the process of planning the sales less drudgery and more enjoyable.
First of all, calculate your estimated cost of production so that there are no surprises when you discover that your income is less than your expenses. You will notice that I used the term estimated because there is no way to know what your cost per bushel will be until you know yields and final production. The cost per acre has to be flexible until those factors are known.
Secondly, understanding the factors that go into making up the price of the different grains is a useful tool for estimating what the costs will be. It is impossible to accurately guess what prices will be in the future. However, without some kind of a guess as to how high or how low prices during the growing season, pulling the trigger on sales will be mostly an educated guess.
Third, understand that prices follow relatively reliable price patterns through the year. It is nearly impossible to predict exact prices throughout the year, certain moves in the cash and futures markets repeat with 60% to 80% reliablility. For instance, during the month of January, the odds of prices going down are about six out of 10. In February, the odds of soybean prices rallying goes to eight out of 10. If a farmer has soybeans to sell, that sale is best made before February 1. Odds are best for a favorable sale at either of those times as opposed to selling in February.
A chart of seasonal price trends is a useful tool in making pricing decisions. Nothing is perfect. However, in the game of playing averages, anything that helps to hit the highs and avoid the lows will improve your profitability.