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Corn+Soybean Digest

Hired Selling

Most farmers market their own crops, though the process is often one of soul searching and agony. After all, a bad decision could cost you the farm.

Robert Schemel, on the other hand, turned to a marketing consultant for help a few years ago. How did it turn out?

"He (the consultant) talked me into doing a risky hedging procedure, and I received a little less than a dollar a bushel for my corn," Schemel recalls.

Yet it's what Schemel did next that might really raise some eyebrows. Even though he had been burned once, he tried another marketing consultant - Brock Associates, Milwaukee, WI. Richard Brock, author of The Brock Report, heads the firm.

Schemel paid Brock's firm for advice on how to market his crop. This time the story ends with a different twist. Schemel estimates he made over $1/bu more on his soybeans than if he had handled the sale himself.

By contrast, most farmers don't want to try marketing consultants even once. Less than 1% use such consultants, who charge a fee for advice on when and how to sell, or take over crop sales directly through a power-of-attorney arrangement.

Brock's firm, for example, charges 3"cents"/bu on corn, and 5"cents" on soybeans. The minimum fee is $3,000. He deals with both large and small operations totaling about 400,000 acres throughout the U.S. Brock Associates also handles sales of wheat, sunflowers, cotton and canola.

Brock doesn't claim he will hit the top of the market. "Our goal is to sell everything above the average price of the year and as much as we can in the top one-third range," he says.

All of this boils down to good timing - when to store grain, when to sell, when to turn to the futures market, etc. What happens when Brock is wrong?

"We get fired, pure and simple," he says. "I've got to say that, in the last three years, that's not happened. Last year, we sold at prices higher than the market. For example, we averaged $7.05 on beans."

Brock lists three reasons farmers need professional marketing help.

"No. 1, they don't have the time. No. 2, most of them don't understand it. No. 3, farmers are very emotional about marketing.

"If a farmer is losing money, he's likely to get emotional and not likely to make good marketing decisions," says Brock. "They're also scared. The scary part comes from not understanding how it works. Most of us are scared by things we don't understand."

When it comes to selling a crop, there's plenty to understand. Getting a good price involves good timing. But good timing comes from correctly interpreting factors that can move markets now and in the future. Brock's staff of 20 monitors grain markets around the world. If any one of them produces a bumper crop or suffers a catastrophic crop failure, prices at home will react. Political upheavals, grain consumption trends and environmental factors can do the same.

"Right now the major issue in the grain markets is genetically modified seed," says Brock. "It's a major issue when Europeans say 'We won't buy any of it.' We have to take that into account.

"We do a lot of market research and analysis. We do a lot of computer modeling. We look at markets, consumption and commodity funds that can swing the market. It's essentially impossible for the average farmer to do this," Brock says.

"He's probably doing a lot more research than I would do," says Schemel, who operates a 3,000-acre farm near Renville, MN. "Too many times the blinders are on and we see only the country, the state and the local area. He's dealing internationally."

"Farmers tend to concentrate on the 'right now' price on the DTN rather than looking at long-range factors," says Dan Alms, of Alms Capital Corp., Palatine, IL, which helps financially strapped farms restructure their operations. "We need to look at whether China is going to have a bumper crop."

Moreover, says Alms, "some of the best prices occur in the spring while farmers are planting or in the fall while they're harvesting." In either case, he says, farmers don't have time to follow the market. For these and other reasons, Alms favors the use of marketing consultants unless an operator can show he can do a good job without help.

Heath Key, chief analyst for OSA Crop Marketing Group, agrees that farmers often lack time to handle their own marketing. "Farms are much larger now," he says. "Producers are much busier managing their operations and millions of dollars in equipment. They have less time to devote to marketing. The market is not something you can set aside and come back to later on.

"So many farmers can't stay in front of the quote machine all day. Hiring an advisor is a very cost-effective way to have somebody look over your operation and be there 24 hours a day to help you market your crops.

"There's so much information in the information society we're in," says Key. "Producers get inundated. They need somebody to act as a filter. You can get swamped by the information and lose sight of the important facts."

OSA, based in Union City, TN, charges $3.50/acre for its full-service marketing program, which includes development of a marketing plan, personalized service from a crop sales specialist, a newsletter, access to the firm's Web site, and sale of the crop under guidelines set by the producer. A less extensive advisory service, which includes a newsletter, Web site access and a crop sales advisor, costs $1.50/acre.

As you enter the new millennium, you face an ever more treacherous path. Freedom to Farm legislation is ending the security blanket of crop support payments. There's less room for error than ever before. And the workings of international grain markets make the job of marketing a crop ever more difficult.

A marketing consultant may help you survive in this environment. But whether a consultant helps or hurts likely depends on which consultant you hire. Picking a consultant is a lot like selling crops - a bad choice can cost you the farm; a good one can save it.

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