5 Steps to a Profitable Grain Marketing Plan

May 15, 2018 08:35 AM
 

The following commentary does not necessarily reflect the views of AgWeb or Farm Journal. The opinions expressed below are the author's own.

With the all-consuming rush of planting, it’s easy to overlook another key spring-time task—grain marketing. 

“Planting is often a prime time to empty the bin and capture higher prices,” says Jessica Groskopf, University of Nebraska Extension educator for agricultural economics. 

How can you capitalize on price rallies? Develop a written plan. 

“The goal of a marketing plan is to keep you on track with the goals you determined at the beginning of the crop cycle,” she says.

Don’t let this process intimidate you. Groskopf provides five key steps to create a goal-achieving and worthwhile grain marketing plan. 

1. Divide your grain into smaller units.
Don’t be overwhelmed by marketing all of your grain at once. Most producers think in 1,000- or 5,000-bushel segments, Groskopf says. It’s also helpful to create a pre-harvest bushel target and a post-harvest bushel target.

2. Set price targets. 
Based on your cost of production, set realistic goals of the prices at which you’d like to price your grain. “Setting prices too high or too low may be detrimental to your plan,” Groskopf says. “At minimum, your price targets (pre- or post-harvest) should exceed your established cash flow price.”

For example, if the average price you want to sell at is $3.50 per bushel and you have five equal quantities to sell, you could set price targets at $3.30, $3.40, $3.50, $3.60 and $3.70.

3. Select sale deadlines. 
Prices don’t always surge above your price goals. To ensure you are proactive about pricing grain, you must also set calendar deadlines. 

“Target prices and sales deadlines work together to help you make sales throughout the year,” Groskopf says. “Commodity prices typically have a defined seasonal price pattern. Setting sales deadlines that correspond with periods when prices are traditionally highest will help make marketing easier.”

For example, corn prices are typically highest in the spring (March-June) and soybean prices are traditionally highest during the summer (June-July).

“Your cash flow needs are another consideration when selecting sales deadlines,” she says. “Are there certain times of the year that you need to make sales in order to make payments? Plan ahead and have this cash ready by setting sales deadlines ahead of payment dates.”

4. Understand your marketing toolbox. 
You can use several types of contracts or other marketing tools to price your grain, such as cash sales, forward cash contracts, basis contracts and hedge-to-arrive contracts. They all have a time and place. Work with your local elevator or broker to determine the best tools to match your plan, Groskopf suggests. 

5. Get a gut check on your plan. 
After you’ve written your marketing plan, share it with someone you trust, such as your spouse, merchandiser or banker. These people can help keep you accountable to exercising the plan and reaching your marketing goals, Groskopf says.

 

Use tools such as the Farm Journal Marketing Education Series and hear the latest in market analysis at events such as Top Producer Summit from Jan. 15-17, 2019, in Chicago. 

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