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RSS By: Chris Barron

Chris BarronHave a margins question? Through this blog, you will gain insight into improving your bottom line, as a margins expert answers questions and provides farm business advice.


Summer Marketing Scenarios

Jul 04, 2012


Scenario management is a process used among the most successful businesses. This practice is best utilized when future conditions become less predictable. Instead of determining one expected outcome, these businesses look at a number of different possibilities simultaneously. Alternative options are calculated in order to create more reliable information for decision-making. Now is the critical time for corn and soybean producers to analyze several different scenarios, as crop conditions, market volatility, and weather all present tremendous uncertainty.
 Crop conditions: Some areas of the Corn Belt have received adequate rains; however, heat has even become a concern in the areas with moisture. Be sure to continually scout fields in order to have a good handle on your own “individual conditions.” Rainfall, heat, insects, and diseases are risks that will need to be monitored for the rest of the growing season. Staying on top of this information daily will help you more accurately estimate yield potential.
Market volatility: The grains have made a significant price increase over the past several weeks. There is no guarantee price increases will continue. In past years market prices reached highs quickly as “crop condition ratings” deteriorated, followed by a rapid decline in price. During those same crop years, we saw an average price increase from the spring low of approximately 42% for corn. This year our spring low was $4.99 for December corn, which means: if corn rallied 42%, we may see a high come in around $7.08. Obviously, this is historical information and has no direct correlation to what could happen this year, but it does give you another scenario for calculating opportunity. Stay informed “daily” as conditions change in these markets, there's no doubt that volatility will continue!
Weather: Long-range weather models continue to forecast above normal temperatures and slightly below average moisture. Many areas of the Corn Belt have now depleted subsoil. Timely rains will be critical for many areas to maintain “current” yield potential. Some areas have had adequate moisture, but continued heat stress may threaten yield potential, especially during pollination. No one really knows for sure if this drought will intensify or whether we’ll see relief. Regardless of what the weather does, be sure to continually calculate its impact into your marketing decisions.
I’ve briefly discussed three uncertainties that we currently face for crop production. Undoubtedly, there are others and the complexities go much deeper than can be covered in this article. My point for this article is to not only encourage you to understand the existing situation, but also to evaluate numerous scenarios and “what ifs.” We face major uncertainty moving forward in the next month or two regarding crop conditions, market volatility, and weather. Be sure to continually review your profit opportunities as conditions change.
Here is a scenario calculation tool for crop production. This tool will allow you to run several side-by-side comparisons. Reviewing these scenarios will give you some insight as you make the complex decisions that lie ahead for your operation.

Margin Scenario Calculator
                                Fill in Boxes
Info. Here
Green Boxes Report Info.
2011 Crop
Scenario #1
Scenario #2
Scenario #3
Scenario #4
Grain Price
Cost per/ac.
Cost per/bu.
Income per/ac.
Income per/bu.
Margin per/ac.
Margin per/bu.
Margin -- ROI

If you'd like a copy of this tool, I'd be happy to send it to you.
Also, if you have questions or comments e-mail me at:
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