6 Grain Marketing Mistakes to Avoid

November 1, 2018 02:47 PM
 
The past four years have drained working capital and equity out of many operations—and trade and tariff issues haven’t made things any better.

The past four years have drained working capital and equity out of many operations—and trade and tariff issues haven’t made things any better.
To be a successful marketer, you need a strategy that considers your financial goals, storage capacity and appetite for risk. You also need to sidestep these common obstacles.

1. Not factoring in your cash flow needs.

“Are there certain times of the year you need to make sales to make payments? Plan ahead by setting sales deadlines,” suggests Jessica Groskopf, University of Nebraska Extension educator for ag economics. This is extra critical after multiple liquidity-draining years. Think of it as cash-flow marketing, adds Ray Jenkins, Iowa State University Extension grain market educator.

2. Forgetting to keep your lender in the loop.

If low prices have you planning to store more grain than normal, let your lender know, says Tim Koch, chief credit officer for Farm Credit Services of America. Share your marketing plan with your lender, Koch suggests, so he or she can properly plan borrowing needs and become your accountability partner when it comes to executing and updating the plan.

3. Failing to cash in on seasonal price rallies.

Corn and soybean prices are typically highest in the spring and early summer. “December corn futures have gone lower from spring to fall in 14 of the past 18 years,” says Ed Usset, University of Minnesota ag economist. The pattern for soybeans isn’t as reliable as corn, but there’s still a distinct repetition.

4. Letting your confirmation bias rule.

“People tend to look for information sources that match their bias of the marketplace,” Jenkins says. “It’s a real struggle.” Find grain marketing news sources and analysts that provide a broad view and don’t swing too heavy bearish or bullish.

5. Not having the labor or time to truck grain.

Plan your selling around logistical targets, says Jenkins, who spent 25 years as a grain buyer and merchant. “I worked with farmers who produced 2 million bushels and had four or five semis. Their biggest downfall was they couldn’t get enough corn marketed in the winter months when they had the labor resources available,” he says. This is important for any size operation.

6. Shooting to market the whole shebang.

Don’t be overwhelmed by marketing all your grain at once. Most producers think in 1,000-bu. or 5,000-bu. segments, Groskopf says. “At minimum, your price targets should exceed your established cash flow price.” For example, if you want to average $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.

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