Make time work for you in your grain marketing
When it comes to grain sales, we’re all trying to find the right balance between overselling too soon and waiting too long to pull the trigger. Thing is, there is no single perfect time to sell grain. As you’ve read in previous articles, we are proponents of having a solid grain marketing plan that will allow you to use pre-established profit goals as your guide instead of chasing the perfect opportunity that never arrives. Recognize your unique cash flow and logistical needs and make time work for you instead of the other way around.
Achieving balance
Making forward sales is a balancing act with risk on one side and opportunity on the other. One side of the scale holds the heavy unknown of crop production, while the other holds the promise of attractive prices. Think strategically about what percentage you’d like to lock in based on historical production. You can also plan grain sales at other times of the year to ensure consistent cash flow when you need it. In the same way, you don’t plant all your ground to one crop, you don’t want to make all the same kind of grain sales.
There is also risk in delaying sales to attempt to hit the high of the market. Ironically, this often leads to selling at the low or into more volatile windows. That can happen if you’re forced to sell for cash flow or to meet logistical needs. News can sway the market in any direction very quickly. For example, over the past six months, growers have been reluctant to forward market new crop given price inverses and two years of healthy price levels. However, new crop prices have trended lower over the same window and now reflect values that are near or below break-even levels as opposed to profitable sales for the grower. There’s potential in waiting, but there are never guarantees, so it’s safer to protect a price you like but don’t love while leaving some opportunity open. Take risk off the table and continue to participate by using averaging or floored contracts to avoid selling at the low of the market. You can not only cover some production costs with grain sales up front, but you can also stay in the market by protecting your price with a floor.
Sell through all four seasons
Why sell throughout the year? You will likely have different reasons to make grain sales in each season. For example, spring is known as the best pricing window, and fall is known as the worst but most convenient for delivery, especially if you’re short of on-farm storage. Be guided by your break-even levels and needs for profit. You know there’s a cost in planting, protecting, and harvesting that must be covered at the very least.
Spring sales
This is when bills come in for crop inputs. To help pay them off, set your profit goals and lock in some profitability early by making sales on your first five to ten bushels because there is no guarantee that prices will stay strong. March through June is the highest pricing window of the year and the best opportunity to lock in highs of the market.
Summer sales
It’s time to make room for new crop. If you’ve got grain in storage, this is when you need to clear it out. But you don’t need to act out of desperation. Take advantage of November futures prices before the crop comes off and pulls them down. You’ll also want to pay attention to local market demand through basis levels to guide your decisions.
Harvest tends to see the lows of the market as there is a glut of grain flowing into elevators. However, this doesn’t mean you need to avoid selling during this time as you can free up more storage space, and it can be convenient to haul straight from the field. Even better – there is zero production risk on the table as you know exactly what your yield levels are.
Winter sales
By winter you may be feeling comfortable with your grain sales, but it’s important to keep up with the markets. Don’t miss an opportunity due to pricing exhaustion. There can be more demand for grain during cold winter months when some folks are hesitant to deliver, making local demand beneficial for those who are willing. It’s a great time of year to look at having a diversified grain marketing plan to elevate your game.
What can you do if you are oversold or undersold?
As a farmer and an experienced marketer, you must constantly gut-check on whether or not you’re oversold or undersold. There’s a way to handle either scenario. If you’re feeling undersold, you can easily put on some new cash grain sales. If you’re feeling oversold, think of adding protection strategies to your current sales.
Having a diversified marketing strategy in advance helps you avoid overselling at the wrong time or waiting too long to sell and missing good market opportunities. If you’re worried about being oversold or undersold, talk to your Cargill rep to discuss ways that you can navigate the market to space out your grain sales.