The Importance of Grain Marketing this Year

September 12, 2016

By Morgan Ball, ISUEO Women in Ag Student Assistant


Photo: April Hemmes driving tractor in Franklin County


Grain marketing is a key factor in farm profitability, but why is it particularly important this year?


The weather was favorable in most of the world and many countries are sitting on inventories of wheat and corn. Buyers shopping around will look to foreign markets where the exchange rate is preferred over the high US dollar.


“Supply and demand still rustle grain prices; we had a record crop last year and are looking at another large crop this year,” said April Hemmes, Farmer in Franklin County.


Most farmers are seeing a drop in profit margins. Typically farmers averaged around a 15 percent margin but now farmers may see margins at breakeven or make no profit at all.


“A marketing plan can be utilized to make storage, selling, and cost   decisions,” says Kelvin Leibold, Farm and Ag Business Management Specialist. 


  Resources available on Ag Decision Maker for storage include:


  https://www.extension.iastate.edu/agdm/crops/html/a2-33.html


  https://www.extension.iastate.edu/agdm/crops/html/a2-35.html


There are two options for storage: on farm and commercial. With storing comes the cost of transportation, handling, and drying. The price of grain would have to improve significantly to offset the additional costs. We want to see the basis narrow between local prices and those at the Chicago Mercantile Exchange, but even then it will be important to implement marketing decisions that best meet the needs of each individual operation. 


The definition of basis - The difference between the futures price for a commodity and its cash price at a specific location. The nearby futures delivery month is usually used (Ag Decision Maker).


Resources available on bases:


https://www.extension.iastate.edu/agdm/crops/html/a2-41.htmlGrain bins


https://www.extension.iastate.edu/agdm/crops/html/a2-42.html


A marketing plan can help farmers estimate profit margins. Do you know your breakeven price? What is the amount and timing of all of your expenses? When will you need to have cash flow? All of these questions will help to determine how and when to market grain.


A good marketing plan may include crop insurance. Look to see what is covered and how it may affect your marketing decisions.


“Don’t be afraid of diving in and learning. Always remember, there is much to learn. I have been marketing corn, soybeans, hogs, and beef for over 30 years and still learn something new at every meeting I attend,” said Hemmes.


Farmers new to marketing grain may visit Ag Decision Maker to watch a series of videos called Crop Marketing 101 https://vimeo.com/channels/926435/videos.


Leibold advises, “Be sure to understand why and how marketing impacts your risk management before diving in.”


                                                                                                                                                                                                                                                   


 


  

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