If you plan your commodity marketing decisions early in the growing season, you’ll have a much better chance to lock in profits. That’s the conclusion of Chris Barron, an Iowa producer and consultant with Ag View Solutions. Chances are good that if you wait, you’ll miss your window of opportunity.
“Usually the time to market is when we’re busy doing other things,” Barron explains. “A primary time and example of that is in the spring. You might be underneath the planter working and your hands are greasy and you think about it and you think, ‘Boy, I probably should grab my cellphone and make a call.’ You don’t do it. The next day, the market’s down and you had your opportunity and it’s gone. The key is to be thinking about getting these targets set.”
To seek out profitability, it’s important to determine what your production costs have been, on average, for the past five years, Barron says. “Get to an actual cost of production on a per-bushel basis, whether it’s corn or soybeans,” he says. “We want to make sure we have all of the costs covered. We don’t want a feel-good number.”
Include all costs, such as:
- Owner draws
- Labor expenses
- Health care
Then set price targets that provide the desired margin. For example, if your average cost of production for corn is $4.10 and you desire a 30-cent margin, your price target should be $4.40, Barron says. Determine your plan for cash sales, options and more.