Whether you’re in the middle of harvest, or already wrapped up, there are five common grain marketing mistakes farmers often make.
“One of them is not really relevant right now, but it’s this reluctance toward preharvest pricing, or pricing before harvest” says Ed Usset, Grain Marketing Specialist for the Center for Farm Financial Management, University of Minnesota. “A lot of producers took good advantage of this last summer during the big rallies to get something done. And they’re in a good position.”
Usset says another mistake, which he teaches his students at the University of Minnesota, is not paying attention to basis.
“I talk about basis and carry and not understanding basis,” Usset says. “Producers need to look around and at basis, and that can add a nickel or 10¢ to their marketing game.”
Usset says the third mistake he likes to point out is one that’s extremely relevant today.
“You have a lot of producers putting corn and soybeans in the bin and waiting for higher prices, and I ask farmers: Do you have an exit plan? What prices are you waiting for? What timing are you waiting for?” he says. “And of course many of them don’t know; they’re just waiting for a higher price.”
Another mistake Usset says is one he sees a lot in the northern tier of the country, and it’s holding grain in storage for too long.
“We have producers, particularly in Minnesota and in the Dakotas, who can hold grain a long time,” he says, “and I like to quote the 11th commandment to grain marketing: You should not hold grain beyond July 1 in the bin. And a lot of people break that every year, and we could go into the reasons they do that.”
The final mistake he sees is a bit more mysterious for producers: the carry in the market.
“That’s the price differences between different futures contracts, and I will note that over the last four or five months, the market has collapsed. It’s not just lower prices, but we’ve gone from inverted markets in grains to sizable carries, and it’s the first time we’ve seen a carry in the market in three years.”
You can learn more about Usset’s grain marketing mistakes, and how to avoid them, through the Center for Farm Financial Management.
