There’s a lesson to be learned from the commodities markets’ reaction to the May 10 World Agricultural Supply and Demand Estimates (WASDE) report released by the U.S. Department of Agriculture (USDA), according to Matt Bennett, grain marketing consultant for Channel Seed. The lesson, he says, is to be proactive with your grain marketing strategies, so you can take advantage of unforeseen surges in prices.
As a grower himself, Bennett knows firsthand the challenges that growers navigate every year. He was born and raised on a farm in Windsor, Illinois, and his family also owned a grain elevator, which is where he initially developed his knowledge about merchandising grain and managing risk.
Bennett recommends that a grower’s marketing strategy should follow these three tips:
1. Know your break-even prices. Bennett suggests that growers should start by determining the farm’s break-even price and profitability potential.
“Especially in years when the profitability margin is so slim, I’m a big advocate of knowing what your breakeven prices are early in the season,” says Bennett.
Bennett advises growers to take their average yield amount and plug it into the Profitability Calculator he developed. The Calculator is a valuable tool that helps growers figure the cost of production and calculate break-ven prices in a simple format.
2. Have a plan. Once growers have calculated the breakeven price, they will know when to sell their grain for optimum profitability.
“Growers need to have a game plan in place,” said Bennett. “Then, if the markets present an opportunity to lock in some profitable prices, he knows when to take advantage of possible sales. For example, if soybeans get to the grower’s price objective, he can go ahead and sell an increment of the crop.”
3. Be flexible and proactive. Bennett also recommends that growers reuse the Calculator as they progress through the growing season to reflect what is happening in the field and in the markets, to make sure grain marketing decisions are based on the most current data.
“I always encourage growers to continue to update their break-even pricing because it can definitely help them to look at hard numbers and make decisions that are more business-based than emotional,” he says. “Being flexible, adjusting your grain marketing strategy, and being prepared in advance are the keys to successful grain marketing.”
(Source – http://cornandsoybeandigest.com/marketing/3-tips-summer-grain-marketing)