Maximize your Revenue through Crop Sales
Six Questions to Ask Before Pricing Your Crops
As you begin to finalize your planting intentions for the 2014 crop year, there are some practical considerations on the subject of crop sales, over and above how you feel about price direction. Here are just six of them.
1. Have you calculated your genuine breakeven costs, including some level of profit, for each crop?
Use all input costs (direct costs, indirect costs, sales and G&A, living expenses, and all financial obligations to be funded from this year’s production) allocated to each crop, calculated against a conservative yield. Use either your current budgeted cost figures or your actual historical costs.
A solid knowledge of your individual price requirements is essential for informed, objective sales decisions.
2. How much of your (conservative) total production can be stored, and what volume needs to move at harvest, as it is harvested?
The first bushels to protect should be the grain that must be delivered as it is harvested, as that has, by far, the most downside price risk.
3. For grain that must move to the elevator as harvested, are there any premium opportunities for early delivery (before harvest really gets going in your area)?
What if a small adjustment in shorter seed maturity and acceptably earlier planting date would earn an extra $.25 or more in price?
4. Will your elevator allow you a more advantageous discount scale (flat moisture discounts, or easier shrink and drying costs, or averaging daily moistures, etc.) in return for a higher sales volume?
This must be negotiated before the sale is made, and early in the growing season before the elevator has adequate to-arrive on the books for harvest. Once the sale is agreed upon, or the elevator is convinced of an adequate local crop, it is too late. When you have negotiated it once, it is easier to ask for a repeat of those terms in subsequent sales.
5. Looking at your month by month cash flow needs, will the proceeds from your grain sales be available to you before those deadlines?
Is enough grain sold ahead of those key dates to allow adequate time for receipt of payment from grain deliveries to meet major financial obligations as they come due?
6. For grain stored on farm to capture the carry for deferred delivery, are you prepared to deliver when the basis spikes higher because grain isn’t moving at an adequate pace to keep the “pipeline” full? This frequently means delivery during spring fieldwork, or holding it until the next summer.
Do you evaluate the deferred bids regularly in order to identify when an advantageous basis is bid? This bid situation may not last long. It is the job of the basis to pull grain from producers’ hands when their focus isn’t selling and delivering, to fill what may be a short-term demand.
If you don’t want to or can’t deliver grain during spring fieldwork because there are only so many hours in each day, independent trucking firms will.
These are only six practical questions. There are of course, many additional considerations regarding protecting grain revenues. Contact us for more information.