Corn+Soybean Digest
Time to forget last year: Return to grain marketing basics

Time to forget last year: Return to grain marketing basics

Our language gives us many alternatives to the idea of starting over. In computerese, we call it a reboot. On the street, we might hear it as a do-over. And who hasn’t looked for a chance to wipe the slate clean? Whatever we call it, everyone has, from time to time, the need for a fresh start.

In the world of grain marketing, I’ve coined my own term for starting over. For grain producers looking for pricing ideas, I stress the need to forget last year. The crop year ahead will undoubtedly be a very interesting year. It will be interesting because, in the world of grain marketing, every year is interesting. Each year finds an unexpected story line; a drought overseas one year, mad cow or swine flu in another year, or this year’s headline – the second straight year of bumper soybean crops.

Forgetting last year is simple advice, but it is much more difficult than it sounds. As I travel the Corn Belt and speak with producers, I’ve come to realize that it is even more difficult today. The challenge? We are not just trying to forget last year, we need to forget an entire decade. The Second Golden Age of American Agriculture (2007-2014) was a wonderful time to be a grain producer. For many farmers, it was an extended opportunity to upgrade machinery, pay down debt and build working capital. The dark side of the Second Golden Age is that it also reinforced some bad marketing habits. In short, farmers learned to ignore price rallies and wait a few months, when the market would give you (yet again) another great chance to sell at an even better price. In short, do not be proactive when pricing grain.

I want you to forget last year and forget the Second Golden Age. It was great while it lasted but that ship has sailed. The time is right for a fresh start and returning to the basics of marketing. Here are the basics.

Have a plan: I’ll bet you filled storage with unpriced grain at harvest. What’s your plan for selling it? To be specific, what price are you waiting for? Last year we enjoyed a 75¢ rally in corn prices from early October to mid-December. Forget last year, but do be ready to sell rallies.

Find the dime: With the Second Golden Age went fat margins. Think small.

Know your cost of production: Every business text will tell you that in a commodity market, the low-cost producer wins. How are you doing with production costs?

Eliminate mistakes: No marketing plan? That’s a mistake. Holding unpriced corn through the summer months? Another mistake. Have you ever noted how the better football teams are the ones that make the fewest mistakes? We can learn something from that.

Look ahead: To “look ahead” is to be proactive. You will make a number of pricing decisions in the year ahead, and some of them will be dead wrong. It happens, but I see no need to re-buy and re-sell your grain in an attempt to right yesterday’s marketing decisions. That’s looking backwards at old decisions, and it’s a poor use of limited marketing energies. Look ahead!

Let’s stop thinking about the way it was. It’s time for a fresh start.

Hide comments

Comments

  • Allowed HTML tags: <em> <strong> <blockquote> <br> <p>

Plain text

  • No HTML tags allowed.
  • Web page addresses and e-mail addresses turn into links automatically.
  • Lines and paragraphs break automatically.
Publish