2020 was a year of anomalies and depending on your perspective, it was a year to remember or a year you would like to forget. Grain markets started out the year in good shape until March, when it seemed like everything fell apart, and we spent much of the growing season wondering if they would ever recover. When August came around, the widespread drought-like conditions and aftereffects of a summer derecho took center stage, and the grain markets began their long march upward. The question becomes what lessons can we take from a year that was marked by a global health crisis and an unforeseen late summer drought? The lesson: have a plan and strive to execute it.
A marketing plan can be simple, or it can be complicated, but it should always start with an understanding of what your true costs are. There are several ways to determine your production costs. Many producers have a relationship with a financial advisor, or they may use a resource such as the Iowa State University Ag Decision Maker.
Once you have a clear understanding of your true cost structure for your farm, you can identify what price point you need to achieve for your grain to cover your costs at different production levels. A recommended course of action would be to start making incremental sales at or above your breakeven price point. The purpose of this strategy is to reduce your price risk while helping to ensure that you cover your production costs. It is often best to be proactive in your marketing. Market data for new crop corn and beans going back to 2015 shows that futures prices are often in the top 1/3 of their trading range prior to spring planting. It takes discipline to market early in the year, but, with a good plan that is well-executed, it can provide you with some of your best opportunities while reducing your risk levels before you ever put your seed in the ground.
History tells us that the next, and often best, opportunity to price your new crop bushels comes sometime in late May through early July, shortly after planting season. By breaking up your grain sales into increments and executing them within the proper time frames, it can reduce the burden that producers often feel to try and sell more of their crop at the highest point of the market (a strategy that often provides more disappointments than it does successes). Moving your average grain price into the top 1/3 market provides producers with a better return and far outpaces the average sales plan.
Developing a marketing plan can be difficult and often feels confusing. Farmers Cooperative Society offers a full suite of marketing tools that ranges from simple to sophisticated and Grain Marketing Specialists who are here to provide our producers with information and to help develop tailored marketing plans and strategies. The Grain Marketing Specialists at FCS are always available to sit down with producers to help develop a grain marketing strategy and to do periodic reviews of your strategy execution and performance. Your Coop is proud to serve you and to help put you in the best position possible to market your grain more effectively. If you are interested in the tools and opportunities that FCS has to offer, please contact Eastern Division Grain Marketing Specialist Braden Kooiker at 712-360-1261 or Western Division Grain Marketing Specialist Warren Drew at 712-360-1744.