Grain marketing is sometimes viewed as a necessary evil of agriculture. You struggle to grow the crop, to nurture it and to get the highest yield into the bin despite a range of obstacles. Yet you’re beholden to a market that can be volatile and difficult to navigate.
“The one thing that creates heartburn for the farmer, year in and year out, is this lack of confidence when making marketing decisions,” says Greg Lumsden, product line leader, Cargill. “Why is that? We really do not have certainty around production. Most farmers start their marketing based on annual production history.”
He explains that you may be beating that yield and have more to market, yet the uncertainty created with what USDA may report could torpedo your marketing plan. “What we can do as an advisory service is to provide more confidence in production numbers — what USDA will say — and not make it a gambling exercise every month,” he says.
Lumsden explains that he went to his internal analytics team, who model the market to discuss ways to better anticipate USDA numbers and local crop production. That’s where the MarketGuide ViewPoint program comes from.
“The adviser has the same tools, processes and trade analytics, and can come up with a USDA yield and forecast,” he says. “We share that back and forth. We go into the field with sensors and the proprietary technology our group uses behind the scenes to get a better handle on what the yield looks like.”
Rolling in that information and Cargill’s grain models, the MarketGuide adviser can provide customers a look at what’s happening with trends regarding yield and quality of the grain. The aim is to help farmers feel more confident in their marketing decisions and not get hung up on reports in August, September and October that can paralyze a grain marketing program.
Essentially, ViewPoint is building a scenario showing the actual field yield ahead of what USDA might report to provide customers confidence in marketing their grain. “We’ve been through Year 1 with the program to build some confidence with current growers and the value it creates,” Lumsden says.
He explains that Cargill is working to better anticipate what the USDA report will say ahead of the announcement, working with similar data points, sample sizes and the states where information is collected to mimic the work. Using sensors and proprietary grain models refined in-house, the company works to determine final yield. “There may be talk of a final yield X, but we think the number is Y, and here’s why we think it’s going to be that,” Lumsden says. “The samples we took in August, September and October and analysis we did were contrarian to the market; we were leaning bearish, and we came out close to USDA ahead of the reports.”
With that information, farmer-customers could be more confident in locking in prices for 2019 and 2020.
He explains that the benefit of the program — and the main reason the company came up with it — was to try to better anticipate USDA numbers, though no one can know what the agency will report. The aim is to come close and provide confidence in making a marketing decision. And the field reporting helps understand potential market moves.
“We were out there earlier than most, and we saw yields at APH [actual production history] or 10% above APH, though most people thought yield would be 10% to 20% less than APH,” Lumsden notes. “We were able to come in and be more aggressive on sales.”
That information can also help a trader get more aggressive in setting basis, locking in prices and being ahead of the market reaction to a USDA report.
ViewPoint will be rolling out to a wider market in 2020. It’s available to Cargill MarketGuide customers. To learn more about this new predictive tool, visit cargillmarketguide.com or reach out to a Cargill market adviser.