Developing and executing on a sound crop marketing strategy is one of the best ways a producer can improve their business performance. That said, it can be a daunting proposition as there are many variables to consider, and with so much outside of your control it’s easy to feel overwhelmed. We’re here to help. Whether you’re a seasoned veteran or a first year farmer, these five tips will help you maximize your returns and feel confident in your crop marketing decisions.
1. Plan Approximately How Much of your Crops To Sell Ahead of Harvest
While prices tend to fluctuate throughout the growing and harvest seasons, having an approximation for how much of your crop you want to sell before harvest can help maximize your returns. It is very important, however, that you remain mindful that your yield estimates may be off. Also remember that you don’t have to sell any of your crops before harvest; establishing contracts for more bushels than you harvest can cut into revenues. Be mindful of your marketing percentage throughout the season, and consider updating this percentage as the growing season progresses.
How we can help - If you need guidance on what yield level to budget for, we’ve got county level yield estimates that can help you build more precise forecasts. By comparing your historical yield to the county it’s simple to create a forecast for the upcoming growing season.
2. Establish Price Targets
Yield uncertainty, breakeven points, and profit margins are all important factors to consider when establishing price targets. Try to calculate production costs at a per-bushel rate as opposed to per-acre to have greater accuracy when determining what your breakeven point is. Determine what a realistic profit margin goal would be, and add it to your breakeven point. Throughout the season, update your yield estimates, manage your basis, and determine the right marketing tools for you. Having pre-established price targets can support you in making quick decisions of when to sell, replacing uncertainty with confidence.
How we can help - Our grain price indexes can provide you with an instant view of forward looking cash prices in your area. With forward curves going out 12 months, you will always know what fair value is for your grain.
3. Set Target Dates
If your pricing targets don’t trigger sales, it’s important to have a secondary trigger in place: target dates. These dates you decide to set will depend on your crop ownership rates which includes storage costs, depreciation, and interest. Historical market data can offer insight into how prices change throughout the season, which can help you determine target sales dates.
How we can help - Basis indexes can be used to understand historical seasonality better than ever before, and can help you predict basis direction. You can access this information in cmdtyView Pro or through one of our Excel templates.
4. Determine Contracts
Futures and options can seem intimidating and complex, but these contracts can also expand your opportunities. When market volatility is low, options strategies can be affordable marketing tools for managing your risk and reward. Using a variety of marketing tools can be a smart way of spreading risk, however a simpler strategy fits better with more risk-averse farmers. Understand your contracting options to be able to make smart decisions with your crops.
How we help - We cover how grain buyers and sellers can increase profits by using basis indexes extensively in our free whitepaper. When you have a view of basis direction and can get ahead of the USDA’s yield figures, the impact to your contracting strategy becomes incredibly clear.
5. Use Market Data
Crop prices can change very quickly; having access to reliable market data can help you make data-driven decisions while keeping emotions out of the selling process. Understanding the patterns and fluctuations that appear in historical market data can give you insights into what you can expect to see happen in the future. Alerts can keep the market in your pocket while you’re on the go, letting you make quick decisions and send offers when the time is right. These insights can help clarify what “good prices” actually look like-- and more importantly, guide your decisions.
Having a plan in place for your marketing volume, prices, and dates will help you make informed decisions, even when time is sensitive. Market data reveals patterns and keeps you in the loop in the competitive crop marketing business, helping to determine what you might be able to expect in the future and giving you a stronger understanding of the decisions you make. Make plans before you need them, focus on the factors you can control, and be confident in making data-driven decisions.
How we help - cmdty is the leading data provider to Agribusinesses, Ag Tech, and Farmers throughout North America. If you’re looking at the markets, it’s probably us providing the data behind it. Between the huge amount of data we cover and our software solutions, there is something for everyone.