Developing Your Post Harvest Cereal Marketing Plan | Agriculture
COLUMBIA, Mo. – “If you fail to plan, you plan to fail.”
Farmers should take this adage to heart when marketing their grain, advises Martyn Foreman, an economist at the University of Missouri Extension.
“By outlining a grain marketing plan, producers have a better chance of increasing the income they derive from the large investments they have made in producing the crop,” Foreman said in a press release.
When developing a plan, Foreman says to keep it simple. By writing a one- or two-page plan, farmers can refer to it as needed and have a marketing strategy that is simple to execute and specific to their operations.
Producers need this information:
- Expected production
- Production cost
- On-farm storage capacity
- Pre-harvest sales
- Balance of production in stock remaining for sale
- Cash requirements
With that information in hand, says Foreman, farmers can create a plan that has four elements:
- For the priceless bushels you have in stock, divide those total bushels into increments. The size of the increments will depend on your cash flow and other financial needs.
Consider selling small amounts more often rather than making two or three more big sales, says Foreman. The smaller increments will help you spread your price risk over more bushels.
- Establish price targets. In most years, crop prices bottomed out at harvest and gradually increased through late fall, winter and spring.
Knowing these seasonal price trends, you can set price targets for a significant portion of the grain in storage and then sell when market prices meet your targets.
The price targets will depend on the supply and demand of a crop. Based on current corn and soybean market conditions, you could take a more aggressive stance, says Foreman. For example, you can set goals that are 20-25% higher than crop lows. In this case, you would start making extra sales when the prices are 10% higher than the crop lows and sell your last increase when the prices are 25% higher than the crop lows.
- Set sales deadlines. Establishing a sell-by date serves as a back-up plan if price targets are not met. You can set sales deadlines to meet cash flow needs or align them with seasonal price trends so you can always capture seasonal price strength.
âIf you set sales deadlines ahead of time, they help ease the emotions associated with making marketing decisions,â says Foreman.
Select the marketing tools to use. Describe how you plan to use core treasury contracts, including forward cash contracts, base contracts, inbound hedging contracts, or other tools to seize marketing opportunities that may arise. to present.