You’ve heard the old adage, “Failing to plan is planning to fail."
At some point every year, volatility in the grain market will cause you to reach for the Zantac. Significant price reversals, whether sharply higher or lower, cause many farmers to lose sleep over their lack of a defined marketing plan or other risk management processes to protect their rent payments and production cost investments, not to mention potential profits.
Grain markets will regularly experience periods of heightened volatility. When you’ve prepared a game plan for these situations in advance, you are much less likely to become a victim of adverse price moves and better able to use market volatility to your advantage. Sticking to a defined plan in times of market turbulence will, in these ways, help you achieve your long-term revenue goals.
Consult with a trusted professional.
We always advise consulting with a crop sales advisor because most producers find their time stretched extremely thin between farm operations and responsibilities within their families and communities. Experienced analysts are able to see volatility for what it is—opportunity. A competent professional can help you effectively analyze your break-even costs and profitability targets at different yields, your cash flow needs, and your futures/options positions, helping you to better understand how to protect the profitability of your specific operation. Generic advice is often incompatible with individual farmers’ financial situations.
Your farm’s revenue is too important to be left vulnerable to market whims and weather patterns. Meeting sales objectives in volatile markets requires a thorough understanding of regional markets, necessary delivery periods, grain storage availability, appropriate hedging tools, and crop insurance protection at varying yields. While you can certainly develop a crop sales plan on your own, a professional crop sales advisor brings a host of capabilities to help you maximize revenue.
- Expertise to evaluate futures markets fundamentally and technically, interpret charts, and research consumptive demand at micro and macro levels
- Understanding of the many marketing programs offered by regional grain buyers
- Ability to calculate the actual cost to carry grain for deferred delivery in on-farm or rented storage
- Ability to negotiate grade discounts with buyers
- Expertise to look at grain bids on a FOB-your-farm basis, even if the destination is outside your normal delivery radius
- Ability to evaluate costs vs. revenues and the effect of fluctuating yield expectations
- Tracking of current market values, crop sales, and deliveries all in one place
Look at a corn chart (or wheat or soybeans), and identify the numerous prices at which you wish you had sold. If you had avoided making a crop sales plan, thinking things like, “But I don’t know how much I am going to raise. I don’t even have it planted yet. It hasn’t gone through pollination. I’m worried about water. I won’t know yields until I harvest,” now is the time to understand that these are precisely the reasons it’s wise to pay a crop sales consultant to help you develop, modify, and effectively execute a plan.
There is another old adage that goes, “Most producers sell in the bottom third of the market.” This doesn’t have to include you! You owe it to your farming business to manage your revenue stream with the same efficiency and dedication with which you manage your operations.
If you’d like help developing a crop sales plan to maximize revenue for your farm operation, contact FamilyFarms Group. We provide medium and large producers with comprehensive management advice to help keep family farms alive and thriving into the future. Click here to browse through several case studies illustrating how we've helped farm operators like you.