June 22, 2021
When I was marketing grain, my neighbors had no excuse for taking bottom dollar on their grain sales. All they ever had to do was ask me what day I was forward-contracting or marketing my grain, and then market their grain the day AFTER I had marketed mine.
They were guaranteed a good price, because almost always, grain was limit up the day AFTER I marketed a portion of my own grain. It was as predictable as a rainstorm when your windrowed alfalfa hay is ready to bale.
With that in mind, I developed a list of tried-and-true marketing axioms over the years that were gleaned from lessons of farmers who have seen their fair share of ups and downs and understood the psychology of marketing.
These may not work on your farm, but they are developed from the school of trial and error:
If you see a profit, take it. Seems pretty straightforward, but the tough part of this recommendation is knowing the price that is profitable. You have to know exactly what your cost of production is. Figure that out, and you will know when a profitable market pricing opportunity comes up.
Market grain on the way up, not on the way down. We always forward-contracted a portion of our grain far in advance. Sometimes, this was not a great decision, because you left money on the table that could have been realized. But if you market only a portion of your grain at a time, you always want to be marketing as grain prices are rallying. Marketing on the dive is not as much fun.
If you are holding on for top price, you will be left holding the bag. If the corn price is $6 per bushel, I always hear folks say that they are waiting for $7. I would advise marketing at least a small portion of production as prices are climbing, so if things go the other way, you capitalized on the opportunity on some of your production.
Don’t worry about getting the top price. Worry about getting a profitable average over all your grain. The average wins the day in my book. Some of the most profitable farmers never receive the highest bid on a single shipment of their grain, but on average, over all of their production, they have profitable prices that pay the bills. That is what I always tried to do, although unsuccessfully often enough.
If you sell all your grain before the top price hits, don’t look back. Don’t worry. Be happy with the profits you have taken. Don’t look back except to learn from past mistakes. Other than unbiased evaluation, looking back can only play into the emotions of grain marketing and usually does no good for the future of building profitable strategies.
The peak price that you didn’t hit isn’t lost money because you never had it to begin with. Not hitting the top price is not a mistake or lost money. It could be lost opportunity, but if you are marketing at a profitable level that pays the bills, it doesn’t matter. Again, try for a good average price over all of your production.
Keep production costs down. Usually the most profitable grain producers do not have the lowest cost of production per bushel, but they do not have the highest either. They spend money on the inputs that give them the most effective and efficient returns. In the end, hitting that sweet spot in production costs will make you money on the marketing side.
My disclaimer on these tidbits is that I often did not follow my own advice when I was farming full time and missed ample opportunities in the process. Each operation has to figure out its own path in marketing and seek its own advice from a qualified marketing team of advisers.
But with volatile grain and livestock markets this season, it is important to know your cost of production, and make pricing targets that are profitable. Then, when the profitable levels pop up, it is easy to reward those opportunities with some sales.
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