The Farm CPA
Paul is now part of the fourth generation in America that is involved in farming and hopes the next generation will be involved also. Through his blog he provides analysis and insight to farmer tax questions.
If Grain Markets Are Topping, Start Locking in Profits
May 02, 2011
During 2008, grain markets were almost as high as they are now, however, many farmers were not able to take advantage of these prices either through already having their crop sold or through inaction by the farmers.
I don't know how many times I have heard a farmer in my office or out in the field tell me "I will sell my crop when it reaches $5 a bushel (or some other round number). As you can guess, it usually reaches $4.95 and then turns around and drops to $3 a bushel where the farmer will then sell the crop to pay for next year's inputs.
Make sure this does not happen to you. Right now any grain crop farmer should be able to lock in profits for this year, probably next year and maybe even the year after. Make sure to review your cash flow projections and if you have not locked in any profits, at least consider locking in all of your input costs.
If you still want to participate in any upward major moves, you can purchase call options on your crop. There are several services that can help you with this.
Try not to be the $5 / $3 farmer this season.