Plan To Store More Grain This Year? Let Your Lender Know

August 8, 2018 06:13 AM
 

Have the jerks and jumps of the grain markets left you dizzy this year? Everything from trade wars to volatile weather patterns to a booming economy has weighed on corn and soybean prices. 

With harvesttime near, farmers will face the question: Do I store or sell?

According to a recent Farm Journal Pulse, nearly 40% of the 944 respondents say they can store 75% to all of their annual grain production on farm. Around 20% of responding farmers can store around half to three-fourths; 15% can store 26% to 50% of production; and around a quarter of respondents can only store up to 25% of their annual production.

 

Farm Journal Pulse - On-Farm Storage

But, since grain prices have dipped over the last few months, will that change farmers’ normal marketing habits?

“If prices remain low through this harvest cycle, we anticipate producers will not sell their crop and store more of it than typical,” says Tim Koch, chief credit officer for Farm Credit Services of America. “If that is a change from a producer’s traditional marketing strategy, they should have that discussion with their lender.”

Koch says both parties need to be aware of this marketing strategy, so they can properly plan borrowing needs.

“Nobody wants a surprise if they don’t have enough funds to operate on in 2019,” he says. “This will be an important dynamic of this renewal cycle.”

Farmers should have a documented marketing strategy that includes their specific production costs and expected yields. Also include where you anticipate the market may move in terms of prices, Koch suggests. Then you can effectively react to swings in the market.

“The market has allowed some good price opportunities, but they are quick windows,” he says. “A well laid out marketing strategy takes the emotion out of it.”

Share your marketing plan with your lender, Koch suggests. Then your lender can become your accountability partner when it comes to executing and updating the plan.

“Communication between lender and borrower is always critical,” Koch says. “But in today’s times with more compressed profit margins, communication becomes even more critical.”

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