Chip Flory: Marketing Moves

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Recently, I wrote that the first five farmers who sent me a marketing question would get an answer from Farm Journal. The response from readers was quick and slightly overwhelming. Within an hour of making that opportunity available, I had nearly two dozen responses and some excellent questions. In the following days, I will be posting some of the farmers' questions along with some answers from our very own Farm Journal Economist, Chip Flory. I hope the information provided is of service to you. -Rhonda Brooks

 

Chip Flory: Marketing Moves For 2018

Isaiah from Ottertail, Minn., asks: I am a relatively new first-generation farmer, farming since 2013. My marketing question for you is how do I utilize the different marketing tools when I’m limited on the amount of storage that I have for my grain? For example, I will produce about 40,000 bushels of corn for the 2018 crop season but I only have storage for about 20,000 bushels. In the past I have tried to lock-in sales for delivery around harvest time to haul in off the combine to make sure that I have a place for it all. This strategy has cost me some potential upside in addition to the anguish of deciding when to pull the trigger and sell grain some 8-10 months before harvest. Our local basis is (-$.50) for October corn now. By mid-summer it will be (-$.70) to even (-$.90).

Read Farm Journal Economist Chip Flory's response.

 


Tyler from Oskaloosa, Iowa, asks: What is typically the best marketing time frame for putting hedges on the markets?

Read Farm Journal Economist Chip Flory's response.

 


Charlie from Reese, Mich., asks: I have 15% 2018 corn sold, 20% 2018 soybeans sold and 10% winter wheat sold. Should I buy short-dated puts or late puts or sell a few more bushels and buy calls? The sold bushels are part of the insured bushels.

Read Farm Journal Economist Chip Flory's response.

 


Spencer in Chanute, Kansas, asks: What is the danger of forward contracting grain without carrying crop insurance?

Read Farm Journal Economist Chip Flory's response.

 


Troy in Rosemount, Michigan, asks: How does purchasing MPCI crop insurance allow me to forward contract? If I were to buy an 85% RI plan with 180 APH that would give me up to 153 bushels to forward contract.  If I had a bad year and I can’t produce the 153 bushels and the price increases due to a shortage of bushels in my area or nationally, I would have to cover the difference out of pocket.  Wouldn’t I be better off waiting until I know what I have in the bin before selling?

Read Farm Journal Economist Chip Flory's response.

 


Curt in St. Paul, Nebraska, asks: I don't really understand the put or call or hedging part of marketing. Can you help?

Read Farm Journal Economist Chip Flory's response.

 


Lloyd in Wakeeney, Kansas, asks: In the past I have always sold wheat now. For 2018 wheat harvest should have sold a week ago but we are so, so dry here. Any thoughts on when to market? I do have a couple of puts on wheat now.

Read Farm Journal Economist Chip Flory's response.

 


Jessica in New Concord, Ohio, asks: Should I be using my grain bins strictly as a basis improvement tool? If not, what is the best utilization of having on-farm storage?

Read Farm Journal Economist Chip Flory's response.

 


Dale in Rockford, Illinois, asks: Should I do a hedge to arrive or basis contract for fall delivery? I am afraid my basis won't improve with a large crop for corn.

Read Farm Journal Economist Chip Flory's response.

 


Randy in Hoagland, Indiana, asks: What is the difference between a put and a call?

Read Farm Journal Economist Chip Flory's response.

 


Mitchell in Warren, Illinois, asks: Everyone that I talk to and ask for information tells me that marketing is going to be the biggest factor in me making it or not.  Being a young farmer and trying to get established, I’m doing my best to be on a strict budget and know my break even.  I don’t want to spend extra money on options in marketing and not have it work out, so I feel an HTA is my best option at this time.  Any advice would be very much appreciated. 

Read Farm Journal Economist Chip Flory's response.