Farmers only get about 30 paychecks in their lifetimes.
Scary thought, huh?
The most important factor in each of those paychecks is grain marketing. And unfortunately, I can count on one hand the number of farmers I’ve met who are ninjas at grain marketing. It’s a tough deal to master.
As part of our Cash Cow Farmer software, the first piece of advice for our customers is building a customized grain marketing plan. We focus on price targets of course, but there are also three other key components of a grain marketing plan that must be addressed.
1) Cash Flow
You will always hear us shouting "Cash is King"; that’s because cash is the lifeblood of a business. Without blood, you’re dead—and without cash flow, so is your business.
Farmers have several periods during the year when they need a large influx of cash to cover expenses and debt. This is extremely important to know when building a grain marketing plan.
You must make sure that when the big bills (land payment, machinery payment, prepay expenses) come due, you have the money to cover them. During those parts of the year, managing the grain marketing plan to execute sales and receive cash will keep you alive.
This means that you should set a goal not only for the price of your grain, but also the point in time when you want to receive that cash from the sale. You’ll build your grain marketing plan around that due date.
2) Storage Space
Storing grain is a lot of work: you’ve got to load it in the trucks, then unload it into a grain bin, and on top of that, manage the grain closely. Even after all that time, if it goes bad you’ve lost a bunch of money.
But storing grain has two main benefits: First, you capture the carry in the market. Harvest time is usually the worst time to sell your grain because the market’s getting flooded with it. Because of this, the elevator raises the basis. They want people to store grain on their farm, then bringing it to them throughout the year when they’re not so busy. Second, you keep the combine going in the field. If you haul every load to the elevator, you might actually run out of trucks—meaning you’re losing harvest time.
During harvest, when grain storage is being filled up, the farmer must have a logistical plan to keep the combine going and to unload the bins. Logistics will tell you when, and for how much, you should sell your grain.
A great grain marketing plan for most people is to sell some at harvest and store the rest. But what that balance looks like will be highly personalized.
Weather and climate add to the personalization of logistics, too. In my neck of the woods, January and February bring us temperatures of 40-50 below zero. I don’t know how many people want to be driving diesel trucks when the roads are just solid ice and it’s colder than heck out there.
But some areas do want to be hauling during those months. It’s got to be personalized so that you’re marketing your grain right when you’re ready to unload it.
Also, we have load limits that come on. In the spring, when the roads are really soft because the frost is leaving the ground, they don’t let us haul as much. If your area is similar, you don’t want to be scheduled to haul a whole bunch of grain when your trucks are going down the road half-full. Those mistakes can be very frustrating.
Planning is part of mastering the business side of farming. We have more coming about building grain marketing plans so stay tuned.
You can call us about your grain marketing plan if you need help.
The opinions of the author are not necessarily those of Farm Futures or Penton Agriculture.