Get your updated grain marketing plan | Master Edition
Now is the time to develop a grain marketing plan.
Many factors influence commodity markets – South American weather, Chinese production expansion, tensions in the Black Sea region and inflation, to name a few.
Cereal prices can now move more in a day than before in several months.
Extension agronomist Andrew Frankenfield points out that with the cost of producing a bushel higher than it has ever been, it’s increasingly important to pay attention to your grain marketing plan.
Trying to guess the month with the highest price is not possible. Consider term contracting some of your new crop over several months.
Historically, additional selling in the first seven months of the year (January through July) tends to have a good probability of high futures prices. Commitment of bushels to delivery could be complemented by crop insurance products, especially revenue protection.
Put options are another marketing tool that could be very beneficial to producers. Put options give you the right, but not the obligation, to sell futures contracts.
Think of buying put options as insurance against falling prices. It gives you a floor price but allows you to take advantage of higher prices.
Frankenfield encourages you to have a discussion with a market advisor to determine the number of bushels, strike price (floor price), and appropriate cost for your trade.
Another very common strategy is to harvest the crop, store it on the farm and make additional sales in the first half of the calendar year. Keep in mind that this option does not provide any downside protection.
Farmers must have a new crop marketing plan in writing and be disciplined in implementing that plan.
Remember that setting a price for your crop is no different than setting the price for your seed or fertilizer six months before you even plant the crop.
There is no marketing tool that will guarantee to reach the top of the market, but aiming to receive a profitable average price year after year should help you sleep better at night.