Marketing grain can be difficult, given so many variables that are out of your control. This year’s historic drought adds stress and frustration to the mix.
Many marketers are second-guessing their past sales, even if they were made at profitable levels. Many feel they have been burned by forward sales and want to try something different.
Farmers might even be thinking “everything is different, and we need to change how we market or not forward market at all.”
This could not be farther from the truth. Do not let this year scare you off from forward marketing or building a plan for the 2013 crop year.
Dale Durchholz, AgriVisor senior market analyst, touched on something in a recent Cash Strategist column that made sense. We tend to forget that the pendulum swings both ways in the market.
We have had an amazing run in this year’s corn and bean prices, but this could have easily gone the other way. If the country had not experienced a drought, we could have yields at trend or better, and we could have seen a 1.8-billion-bushel carry out in corn. This scenario moves prices to $5 or worse, instead of the $8 we are currently experiencing.
If you were to compare prices of corn, for example, December 2012 was trading a year ago at similar levels as the December 2013 contract is today.
The biggest driving factor in the market advance was the drought. The likelihood of another drought of this severity in 2013 is slim.
However, there is a possibility the weather will remain drier than normal into next year. Let’s say we have great weather and a great yield in 2013. What happens to price then?
These are both “what if” scenarios and again, out of our control.
So, how do you make a decision on what action to take? Bring it back to the basic fundamentals.
The basics to building a solid marketing plan begin with your estimated cost of production and your breakeven point.
Once you have an idea of those numbers, you can start making small, incremental sales at profitable levels.
I recommend looking at the University of Illinois non-land operating cost estimates for 2013 corn and soybeans as a starting place. They can be found at www.farmdoc.illinois.edu
Do not let the chaos of today blind you from making sound business decisions for tomorrow. Continue to look forward to next year’s crop, and be ready to take advantage of profitable prices.
Cory Winstead is AgriVisor’s account manager. His email address is firstname.lastname@example.org