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The Daily Grain
An opinion blog |
What's Your Plan? 10/07/19 9:01:17 AM
Having a marketing plan is more important now than ever before. With so many emotions and uncertainty in the air, it’s easy to get wrapped up in all the “white noise”, but the truth is no one knows what the market is going to do. The best thing to do is to have a plan and stick with it. Don’t let your emotions take control. Take the time to sit down and figure out what works best for you. Every farm is different, and everyone has different needs.
Here are some things to think about. Do you like to sell all your crop before harvest or are you the opposite, preferring to store everything until the price rallies? Maybe you are in-between and do a little bit of both. No matter what you decide, it’s important to think about WHY you chose that option, and how it’s going to work in your best interest. It’s important to set realistic goals and targets and be aware of each marketing alternative that is offered to you.
Putting your grain in price later might allow you to stay in the market, but it also exposes you to downside risk and comes with storage fees. Forward contracts allow you to set your price and protects you from downside risk, but you’re out of the market. Minimum price contracts allow you to sell your grain upfront and still be open to upside potential, but there is a fee. Every option has its pros and cons. It’s important to know those, look at them from all different angles, and chose the best ones for you that you are comfortable with.
For instance, did you know that there are no marketing alternatives after harvest that are free? You probably did or just didn’t realize it, but marketing grain before you harvest it is the cheapest form of marketing; free. But some people just aren’t comfortable with it. In a year like this year, when we had a difficult time getting the crop in, it’s not hard to see why. However, in most years, forward contracting gets you higher prices for free. Setting targets or open orders helps achieve this. For example, taking the time to say if the market reaches this price, I will sell it, is much easier now, than when it rallies 50 cents, and you get caught up in the rush thinking it will go even higher. Don’t lose nickels and dimes chasing pennies.
Now, let’s look at a real-life example. When comparing whether to sell your beans at harvest this year or wait till the price goes higher, you need to know what kind of prices you’re looking at. Take a look at this chart below.
| Sell Date | Storage Cost from October (.03 + .04/bu/mo) | Price at Harvest |
Break Even | | Jan 30 | 15 cents | $8.50 | $8.65 | | March 30 | 23 cents | $8.50 | $8.73 | | July 30 | 35 cents | $8.50 | $8.85 | | Aug 30 | 43 cents | $8.50 | $8.93 |
This is the price of beans today (Oct 3, 2019) at our Saline elevator. If you were to bring in your beans and sell them right now, you would get $8.50. Now, say you wait till March to sell your beans. You would need a price of $8.73 or more to make having placed your beans in price later worth it. $8.73 in March is the same as $8.50 today. Just something to think about and beware of as we get closer and closer to harvest, and you may be faced with this decision.
Preparing a marketing plan can sound confusing and overwhelming. With all the “white noise” out there, it makes it hard to know what to do. There are so many opinions and information being thrown at you. We can help you! Making a plan doesn’t have to be hard, or extensive, or confusing. Just the opposite. It should be something you’re comfortable with and that works best for your farm. Call us today or stop by the Saline office. We can help you develop a plan that fits your needs. We are here for you and want to help! Farmers have so much to worry about, marketing doesn’t need to be one of them.
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