Successfully marketing grain is one of the biggest challenges most farmers face. Tight margins, weather uncertainty and global trade issues can quickly derail the best laid plans.
Crop prices continue to be the No. 1 challenge for farmers. That’s according to a new report from FarmLogs. In the 2018 State of Grain Marketing Report, the crop marketing software company surveyed more than 1,000 farmers across the country on their grain marketing habits and strategies.
Knowing your cost of production is key to a profitable marketing plan, says Shalin Parmar, chief operating officer with FarmLogs. The survey shows 77% know their cost of production per acre, while 23% do not.
A good record-keeping system is imperative to have an accurate and up-to-date gauge on your profit opportunities. According to the survey, 56% of farmers use spreadsheets and other farm management software to track expenses. Whereas, 18% of farmers use only farm management software to track expenses, and 19% of growers use only pen and paper to track expenses.
“Farmers love growing crops and are often optimistic that the market will go up,” Parmar says. “So they get anchored on market prices. Instead we want them to start with profitability. Know your cost of production and make sure to lock in profit in a disciplined way when the market gives it to you.”
Time and Price Goals
“Most farmers don’t think about marketing every day,” Parmar says.
Marketing discipline starts with setting emotions aside and setting concrete goals. The survey shows 74% of farmers don’t plan what percentage of their crop they want to have sold by a certain date.
"The best marketers are disciplined and flexible," says Chip Flory, host of AgriTalk, AgriTalk After the Bell and Farm Journal economist. "Have a marketing plan that allows you to hit your marketing objectives and exposes you to enough risk to take advantage of better pricing opportunities later."
Parmar encourages farmers to develop a diversified marketing plan that uses several basic marketing tools.
“A good rule of thumb is to market up to your crop insurance level, but leave a little open. What you want to do is put yourself in the best position to make a reasonable profit by having a diversified and disciplined approach.”
In the survey, 70% of growers say that how familiar they are with a contract is one of the biggest factors in deciding how to sell their crop.
Familiarize yourself with three or four marketing tools, Parmar suggests, and use them.
“You don’t need to have all the bells and whistles,” he says. “Spread out your bushels and use some tools you are comfortable with to have good diversification.”
Don’t gun for the highest prices, Flory advises.
“If you sell the high in the market, it’s coincidence or luck,” he says. “The same is true for the low.”
The bottom line in marketing is that prices alone don’t matter, basis alone doesn’t matter and yield alone doesn’t matter.
“What matters in risk management is the revenue available from current prices, basis and expected yield—and how that revenue compares to costs,” Flory says. “Simply put, understand when a marketing opportunity is too good to pass up and take advantage of it.”