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FarmLogs gets insight on how producers look at risk management for their farms, and it finds opportunities.

Willie Vogt

June 19, 2019

4 Min Read
risk-management graphic chalk on blackboard
SURVEYING RISK: FarmLogs conducted a risk management survey and found some surprises. Are farmers taking advantage of the tools available?marrio31/Getty Images

It’s simple: Farmers aren’t fans of risk management. Of course, there are the exceptions who are researching stats, and moving averages, basis changes and global risk factors. On the whole, farmers are great at raising a lot of corn, soybeans and wheat — yet when sales time comes, it’s a challenge.

A new survey from ag tech startup FarmLogs offers some insight into those issues, and co-founder and CEO Jesse Vollmar shared insights on what the research showed, including some surprises.

“The No. 1 thing that stands out to me — and haunts me — is the fact that when we were running this survey in March and April, 47% of growers had not sold a single bushel of their 2019 crop,” he points out. “That’s really frightening to me, because the best opportunity to lock in profit is earlier in that contract and as soon as you start taking on production expenses.”

FarmLogs surveyed 1,000 growers about their marketing habits, and the report offers a snapshot of how this group sees marketing.

Vollmar, whose company fired up its new AutoHedge marketing tool earlier this year, is an advocate for pulling the trigger at regular intervals to move grain into the market and cash into your bank account.

“These respondents had not pulled the trigger on a single sale, and that puts people in a tough spot,” he says. “And they’re leaving money on the table and taking unnecessary risk to not pull the trigger on forward marketing.”

Grain prices have been soft, but even with the flood-, rain- and disaster-impacted 2019 planting season, Vollmar advocates for some forward selling — and the recent rally may not have made a difference: “I would argue they wouldn’t have forward-sold crop anyway and taken advantage of this rally.”

That rally was a good thing for AutoHedge users, Vollmar adds. “The service has a ‘Boost’ feature that allows producers to price added bushels if the market rallies; and we had several who took the opportunity to use the feature, price more bushels in the program and rebalance their portfolios.”

Storage and marketing

Another issue Vollmar saw in looking at the research results is that farmers may not be leveraging storage properly. Given the amount of capital investment in rural steel, his insight may surprise many readers.

“I think many growers misunderstand and misuse storage as a marketing tool,” he says. He acknowledges his perspective may differ from many, but he offers some interesting observations about grain storage.

First, he notes that when you store grain on the farm, you’ve already incurred another cost. You’re going to have to handle that grain twice, which adds cost to every bushel.

“Don’t get me wrong, I realize that there are logistical concerns,” he says. “You have to keep a combine moving and can’t always take grain right to the elevator. Sometimes  you do have to put grain in the bin.

“I respect that, but it comes at a cost that many growers fail to fully appreciate. You not only move grain twice, and pay to move it, but you also increase the damage to the grain and shrinkage.”

His second point on grain storage and marketing concerns moving from grain to cash. “If you put that grain into the bin, you are failing to convert that inventory to cash; and if you borrow money when you have inventory in the bin, that’s a challenge,” he says. He advocates converting grain to cash as a way to either reduce the need to borrow, or to take that cash and invest in the operation for further growth.

Finally, he talks about carries and markets, noting that if you push that grain into the market — not into storage either on farm or at the elevator — you’ll make more money by never storing that crop. While that can be complicated, and there are basis plays, he’s looking at grain as a cash asset. Vollmar notes that during the growing season, there are opportunities to hit those profitable grain price levels while the crop is still growing in the field.

Risk management challenges farmers. The FarmLogs survey offers insight into practices farmers find valuable and other key information. Here's a link to the report: 2019 FarmLogs report online. Learn more about FarmLogs at farmlogs.com.



About the Author(s)

Willie Vogt

Willie Vogt has been covering agricultural technology for more than 40 years, with most of that time as editorial director for Farm Progress. He is passionate about helping farmers better understand how technology can help them succeed, when appropriately applied.

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