Have You Made 2023 Grain Sales? Now May Be the Time
Multi-year grain sales are intimidating. It can be really hard to sell a crop before you’ve planted it — or even bought the seed for it. But a big-picture focus can pay dividends in grain marketing, says Chris Barron, Iowa farmer and national financial consultant for Ag View Solutions.
“I encourage farmers to correlate sales with expenses,” he says. “For example, if you lock in $50,000 worth of fertilizer, why not sell $50,000 worth of grain?”
Listen in as Barron discusses his grain marketing concepts with Chip Flory on AgriTalk:
Barron, who advises farmers across the U.S. and into Canada, is forecasting a 7.5% increase in soybean production costs for 2023 versus this year and a 9% price increase for corn production costs. For this year, soybean production costs jumped 12% for soybeans and 20% on corn versus 2021.
Those potential cost increases bring more risk for the upcoming year. As a result, Barron says his clients are about 7% sold on 2023 corn production expectations and 6% sold on soybeans.
“With where current prices are at as the 4th of July, we're looking at about $280 an acre for profit opportunity in 2023 for corn and about $175 an acre profit opportunity for soybeans,” he says. “So, I sit here and think why would we be 0% sold? If you know your land costs and your equipment costs, you're bumping up against 50% of your cost of production as a known number.”
Why not sell 10%?
Barron suggests putting in a price target for a few profitable sales on a small percentage of 2023 production.
“Then go to the lake and or go to work in the shop and forget about it,” he says. “We are going into a time with short windows of volatile prices. That volatility creates opportunities, but you've got to have those targets in place.”
Flory agrees securing price targets with your elevator or other grain buyers is a successful way to remove emotion out of your marketing.
“With the price targets out there at the elevator, you are always an active marketer,” he says. “That's really important in the volatile environment we're in now.”
Barron shares this advice for grain marketing:
- Start with an accurate cost of production, which should be the foundation of all your marketing decisions. Cost of production must be looked at in terms of “cost per bushel.” Before and during the growing season, use your five-year production average. After harvest, use your known yield.
- Determine a realistic profit margin. Some years you minimize loss rather than maximize profit. In that case, set a floor to minimize downside risk and manage losses. Continually selling at a loss can’t continue. But shooting for an unlikely price and settling for a much lower price is a bigger problem.
- Select the best tool. You can use numerous tools once your marketing floor is established to leave the top side open. As you make sales, do them at a predetermined percentage. For example, know what a 10% sale is rather than making a 20,000-bu. sale. You’ve probably grown over the years and a 20,000-bu. sale might only be 3% or 4% of your total production and leave you way undersold at the end of the growing season.
- Analyze your local basis levels and opportunities. Understanding your local processor needs and matching your deliveries with their needs will pay big dividends to your final cash price.
Barron’s final take: “We have to be cognizant of the risk we're taking if we don't start to take advantage of some of those opportunities.”
