Market for the Long Term

November 11, 2015 02:58 AM
 
Harvest15

Top operators sell steadily, guided by production costs

Short of inheriting a windfall, get-rich-quick schemes are a fantasy. Grain revenue requires calculated decisions and sales, not lucky breaks. 

Best-in-class producers market inside a multi-year framework, make quick judgments only if they’re grounded in well-vetted written plans and investigate local, domestic and global trends to find and capitalize on strategic advantages. Top Producer asked three producers to share their marketing philosophies, sales plans for the 2015 and 2016 crops and strategies for monitoring market movers.

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Mike Daniels 
Salem, Wis
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Whether yields are gangbusters or dismal, Mike Daniels of Crane Grain Farms in Salem, Wis., typically sells a third of the crop before planting and a third by the Fourth of July. 

“Then we’re only gambling on the last third,” Daniels says. “We do that with hedges, and we use our hedge-to-arrive [HTA contracts] that way. To take it to the next step, in our area there are a couple of ethanol plants.” 

For 2015, all of Daniels’ soybeans and 75% of his corn were basis contracted as of late October. His region has seen particularly good basis levels, and he expects to begin selling $4 corn for the 2016 growing season soon. A knowledge of trucking costs and a commitment to working ahead on sales creates flexibility that wouldn’t otherwise be possible. 

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Brent Judisch 
Cedar Falls, Iowa

Make sales at profitable prices. That’s the advice of Brent Judisch, whose acreage in Cedar Falls, Iowa, includes two-thirds corn and one-third soybeans. He has capacity for 40% of grain, so he is aggressive in marketing. He makes sales when prices go above the cost of production. On corn, for example, a 30¢ to 40¢ rally signals it’s time to sell.

“We sell up to half of our crop up to a year in advance before we plant it,” Judisch says. HTA contracts are put into place. His basis is 30¢ to 35¢ under the Chicago Board of Trade price a year out normally and as his delivery date gets closer, basis gets down to between 15¢ and 18¢ cents under the CBOT price, which allows Judisch to pick up from 12¢ to 20¢ in the basis gain. 

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Lee Lubbers 
Gregory, S.D.

For the first time this year, Lee Lubbers of Gregory, S.D., began supplementing his traditional marketing plan with the guidance of a strategic planner. 

“We have a very good pulse on what is going on in the world weather-wise, economically and socially,” Lubbers explains. 

What Does It Mean To Me?
  • Market several years out, not one growing season to the next.
  • Know costs backward and forward, and prepare to sell on favorable prices.
  • Consult experts and build relationships to have the best information possible.

When a good marketing opportunity arrives, Lubbers sells right up to his actual production history (APH) yields. He carefully tracks cost of production when doing his balance-sheet and cash-flow projections, then applies the other marketing strategies, including using puts and calls in a disciplined way. “None of our options ever expire worthless,” Lubbers says. “We have learned how to make options work for us.” 

 

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