During times of lackluster, sideways grain values, it is more important than ever to maximize sales revenues during the normally short time during which profitable opportunities arise. While there’s always a possibility that a summer weather rally will come along to save the day for the reactive producer, making small changes towards a more proactive crop sales mindset will significantly improve your results. It doesn’t have to be all or nothing; even if you begin by practicing one or two of the steps we recommend, you're likely to see improved results (and even a 5% to 10% improvement in sales revenues adds up, year over year).
The reactive producer who waits and waits to sell will occasionally come out on top (2012 and 2013 come to mind), but this is not the case in most years. Are you willing to risk your profitability year after year, vulnerable to being unsold and unprotected, in hopes of a rare grain production crisis?
Steps to Developing a More Proactive Marketing Approach
To improve the proactivity of your approach to marketing, consider implementing the following measures.
Improving recordkeeping in order to monitor and accurately assign financial expense is a first step. Proactive producers create a budget by crop tied to individual fields and yields. They use accounting or revenue management tools to track expenses and revenues. Those tools might be accounting software such as QuickBooks or their own Excel spreadsheets.
Many farmers are stretched extremely thin, managing so many necessary operational responsibilities that there aren’t enough hours in the day to devote to studying grain markets, basis evaluations, fundamental and technical futures analyses. Grain values have a strongly seasonal component. Proactive producers regularly estimate yields in order to project crop volume and market grain that cannot be stored after harvest during historically high price timeframes.
Get expert advice.
Consulting with agricultural experts can give your farm business an important edge.
- From an operations perspective, proactive producers hunt for ways to manage and minimize costs without significantly affecting yield. They work with an agronomist or CCA to hone seed selection for their individual soil types and microclimate, which may well differ from what the local seed rep recommends planting from his own available inventory!
- Engaging the services of a solid crop sales advisor often pays for itself. As one crop advisor puts it, “Making a sale to the elevator isn’t necessarily the final price of the sale. There are often other steps producers can take to enhance price after a grain sale is made.” Furthermore, you can’t be an expert at every aspect of farming. An experienced crop sales advisor can apply practical expertise to enhancing your revenue! It’s like having a grain merchandiser on staff at your operation—so you can compete with the best of them.
Invest in storage.
The final point has become clear to me through my 40 years of work in the grain industry. Eighteen years out of twenty, producers with adequate grain storage earn significantly higher revenue from grain sales than producers who must sell and deliver most of their grain as it is harvested. Improved revenues could come from enhanced harvest efficiencies, basis appreciation, or from carries in the market. There are also opportunities for producers with plenty of storage to participate in IP grain contracts, capturing a premium for storing specific varieties for eventual delivery to processors or exporters. Storage pays for itself!
Small steps will enhance revenue results! To learn how FamilyFarms Group can help you build a healthier, more prosperous farming operation, click the link below to request a free needs assessment. We'll look at where you are now, where you'd like to go, and how we can help you overcome the challenges you face.
Image source By Leaflet (Own work) [CC BY-SA 3.0 (http://creativecommons.org/licenses/by-sa/3.0)], via Wikimedia Commons