How to Better Market What You Produce
Lock in first- and second-base hits
“Beginning farmers need to understand their breakevens and market their commodities for a sure profit, not necessarily for the highest price,” advises an experienced farmer from Wyoming.
“When you’re just getting started, you need to lock in the first-base and second-base hits. Don’t wait for the home runs. When the market gives you a profit, you need to lock it in.”
Experienced farmers and ranchers offer practical wisdom
This advice comes from “Practical Wisdom,” a joint effort by Farm Journal and Farm Credit Services of America (FCSAmerica) for experienced producers to share lessons learned and insights gained for the benefit of today’s young and beginning farmers and ranchers. Several operators wrote about the importance of smart marketing.
“Ask a lot of questions and make sure you understand the (marketing) terminology and how various contract options work,” wrote a farmer from Minnesota. “Don’t beat yourself up if you make a mistake. Rather, learn from those mistakes.”
Use proven marketing strategies
With so much volatility in commodity prices, there is no better time than now to use proven marketing strategies. Tyson Anderson, a financial officer with FCSAmerica’s Lincoln, Neb., office who has experience as a commodities broker, offers these steps:
- Know your break-even down to the dime, if not the penny. This number should account for all term payments, input expenses and family living. Without this critical number, Anderson said, you are essentially “throwing darts” because you don’t know where to start marketing your grain.
- Compute your desired profit per acre or profit per bushel to establish a profit target. You can limit the effect that emotion plays on your marketing decisions because you know the price at which to sell.
- Consider selling your crop in 5 to 10 percent increments – up to your crop insurance guarantee – to further reduce the emotion of marketing.
Armed with this marketing strategy, you can sell grain at a profitable level during a downturn, while also maintaining the flexibility to continue marketing into a rally. Some of the most successful marketers start selling when the market goes up and don’t stop until it starts going down. Just as importantly, they don’t let their emotions get in the way of sound management decisions.
Present a solid, comprehensive marketing plan
Russel Robertson, an FCSAmerica customer whose Robertson Ridge Farms operates in the Lincoln, Neb., area, routinely markets his corn and soybeans on the Board of Trade. Robertson started like many beginning farmers – by cash marketing at area elevators. To limit his risks, he moved into forward contracting, then continued to expand his tactics as his know-how grew.
Robertson said, like most young producers, he didn’t have much working capital in the beginning. But capital is as critical to marketing as it is to other areas of farming. Robertson advised young and beginning producers to develop a good relationship with a lender and an insurance agent – then present a solid, comprehensive marketing plan to access the capital needed to support it.
“They need to communicate with their lender about their marketing plan. And they need to communicate their marketing plan to their insurance agent,” Robertson said. “ ‘This is what I’m insured to. This is what I’m trading on the board.’ ”
If young and beginning producers don’t yet have the capital or the stomach to trade on the board, they still can gain experience. Robertson advised using something as simple as yellow pad to simulate trades, making decisions early in the year and tracking results over time.
Stay informed and educate yourself as much as possible
Robertson makes his marketing decisions by talking to as many people and reading as much as he can. “Your job in marketing is to manage information,” he said.
Marketing advisors can be a good source of information, Anderson said. The best one for you is the one who meets your specific needs and has your interests in mind, he said. “There are plenty of services that give their advice on when they think the right time to sell is. But is that the right time for you?” Anderson asked.
A good advisor will help you identify your breakeven and profit target; give you informed advice and market direction that makes sense for your operation and risk tolerance; take the time to explain the many marketing options for each sale, along with their pros and cons; and never put yourself in a position that you don’t understand or are unable to explain to others.
“No one is always right; there is no silver bullet when it comes to marketing,” Anderson said. “The best you can do is to stay informed and educate yourself as much as possible.”