November 1, 2023
Even when harvest ends, there are lots more decisions you need to make. Agronomic choices for next year, equipment assessments, and marketing decisions for the recently harvested crops.
That last item might seem spookier than a ghoul on Halloween night. In fact, one of the scariest tasks for some producers is the act of selling grain. Why?
Sometimes, a person has a general fear of making any decision. It’s called analysis paralysis. Yet, with most farmers producing crops and being a general steward of their assets is something they take pride in. It’s what they see and use every day: it’s tangible. So for many, making the decision to release their ownership of the product they have produced comes with great anxiety.
A daily conversation point
My conversations with farmers daily revolve around this issue. This time of year when the farmer is wrapping up the production year and assessing their reward, I tend to hear the repeating comments, “I’m terrible at marketing.” I also hear, “I wish I would have sold more earlier.” Sometimes, I hear this common phrase, “I need help with selling grain.”
Payday is always my favorite day. I would like to have an idea of what the reward will be for the efforts I put in. I know that it’s not always possible to do so, especially with the uncertainty of farming. I challenge you to familiarize yourself with the tools that will give you some certainty through the growing season.
Crop insurance impacts
I personally do not sell crop insurance, but will be the first person to encourage you to work with your agent to apply the best product for your operation and to understand how it impacts you in different circumstances. Tuesday was the last day of the Harvest Option pricing for Multiperil Crop insurance. There will be many producers who will receive an indemnity payment due to the drop in futures price from the spring price to the harvest price. Others will need indemnity payment to make them whole because of the lack of production.
The beauty of insurance is that it gives you confidence and ability to sell grain during the growing season before it has been harvested.
Most farmers have sold cash grain to the elevator or end user in one way or another. I would guess that most are familiar with Forward contracts or HTA orders. When I discuss marketing plans with most, I usually remind them that if they don’t have some type of selling order in place, they probably don’t have a plan.
The farmer is always long corn until they retire, and the tools available allow you to sell grain for multiple crop years in advance. Most farmers have enough known cost to comfortably make sales at some level out into the future.
Here’s a shocking fact
There has been more money lost by producers not willing to sell than there ever was by producers selling too early.
What I just mentioned probably spooked some of you, and that’s why it’s important to know how to remain flexible. FOMO – fear of missing out – is real. The grain producer only gets one product per year to sell and as that inventory gets smaller it gets more difficult to sell something that you know you can’t get back – unless you can!
I encourage you to look at the tools that allow you to re-own, stay long, or add flexibility to your marketing plan. For example, when you are planning your marketing year, have a goal of how “long” you want to stay. If you are 25% sold in the cash market and your goal is to remain 75% long, don’t let that deter you from selling grain. Find a way to use options to keep you at 75% long after you make the cash sale.
On Halloween of 2022, December Corn traded $6.30 per bushel. That is $0.0025 higher than the highest tick in the 2023 calendar year. You would have been frightened to sell 100% of your corn as you were probably still harvesting the previous year’s crop.
Everyone has probably heard a horror story of using futures and options and that may spook you more than missing out on opportunity. There are plenty of ways to take the scare out of your marketing. Make sure you find that person to help you learn the tools of the trade and make sure they are using a risk-minded approach.
Burks is a partner at Agmarket.Net. Feel free to contact him directly at 608-384-5438 or anyone at the AgMarket.Net team at 844-4AG-MRKT.
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