Farmers' Corner June Issue Index

playground.gif (15852 bytes) Remember those days on the playground, when they used to pick teams for a game of baseball or basketball? The two kids who got to be captains were the lucky ones. The rest could only wait anxiously to be picked, each hoping his or her name would be called closer to the beginning than the end.

There were mainly two schools of thought among captains on the playground. The first was the sentimental type. This captain would be sure to fill his team with friends, giving little or no thought to their skill at the game in question.

The other type of captain was purely practical, selecting team members based on athletic skill and ability, building the best team possible from the choices available to him.

Now, lets look at the virtues of each one. The first captain may or may not win often. It all depends on whether or not his friends are any good at the game being played. Either way, though, he probably has it right -- loyalty is better than winning all the time. The second captain is concerned only with stacking the odds in his favor, and, as a result, probably wins more than he loses. As a person, it is certainly better to be like the first captain. However, as a farm marketer, you need to be like captain number two. Your goal with every crop you grow should be to get as many marketing factors in your favor as possible.

If your goal is to realize a profit, every decision you make should be made with that goal in mind. The playground captain who wants to win carefully selects players who are skilled and likely to help him reach his goal, and you should have the same objective when you are deciding among marketing alternatives.

Every marketing alternative you use
can be thought of as a player on
your team. Are you choosing
"players" that will help you win?

Now let's take this discussion from the playground to the big leagues. Coaches and managers of professional sports teams travel far and wide to seek out good players to add to their team. They look at each player's strengths and weaknesses, and determine how much it will cost to have him on their team. Only after careful evaluation of all

the factors do they decide whether or not a certain player is desirable. The way you choose marketing alternatives should be similar. You are trying to reach certain goals, so your "team" should consist only of the kinds of alternatives that will help you reach them. We want to help, so we've looked at several marketing alternatives, and here is:

The Scouting Report

Player

Evaluation

Target Contract Will play for free -- will always score if given the opportunity -- low-maintenance (doesn't need constant attention)

Forward Contract Will play for free -- almost always scores, but is a team player; if he gets in trouble, will pass off to Minimum Price or Roll Forward

Minimum Price Contract Requires money, but a lot of bang for the buck; guarantees a certain price, plays great defense against lower prices, and can score extra points if he gets an opening.

Storage / DP Both ask for a lot of money with no guarantee of performance -- can't defend against lower prices, and you can never be sure if they'll score or not -- have been responsible for many losses

Harvest Marketing Alternatives

If prices don't change much between now and harvest, then most producers will have some important decisions to make at harvest time. Here are some of the alternatives you may have to choose from:
Sell At Harvest Price & Take LDP

This alternative will give you a price that is comparable to loan value (differences in elevator price & posted county price may result in a slight difference one way or the other). You will get your money at harvest, be protected from lower prices, and avoid any additional costs. Something to consider is that if you have higher than average yields, a lower than normal price will return a higher income than at normal yields.

Sell At Harvest Price, take LDP, & buy a Minimum Price Contract

You will receive money at harvest, be protected from lower prices, and you can apply the LDP toward the cost of the Minimum Price Contract. This will keep you in the market so you can participate in higher prices if they occur.

Put grain on the loan

You will receive loan price at harvest, be protected from lower prices, and be in the market to participate in higher prices if they occur. You will be responsible for storage fees, and interest if the price goes up and you sell above loan value. However, a lack of qualified storage space at harvest may make this alternative unavailable.

Take LDP and put grain in storage

This alternative gives you no protection from lower prices, and you will be responsible for storage and interest charges. Of all potential alternatives, this one is the most dangerous, and we certainly do not recommend it.

If you would like to discuss any of these options in greater detail, please call or come in and see us.

Between now and then . . .

For the time remaining between now and harvest, why not enter a Target Contract on your anticipated production? The worst that can happen is that your target won't be reached, and you'll go into harvest in the same situation that you would have anyway. The best that can happen is that your target gets hit and you've got grain sold at an acceptable price.

Get Educated Ahead of Time

If you are planning to take advantage of the LDP program (which we recommend), then be sure that you get up to speed on how it works before harvest. Here are the basics; be sure to get in touch with your county office to find out what you have to do to qualify.

Form 709 -- This form must be filed with your county office prior to harvest. Then, you deliver the grain to the elevator, sell it, and collect the LDP at the rate in effect on the date of delivery for each load.

Form 666 -- You deliver the grain at harvest and put it in storage. It must remain on storage until all bushels are delivered and you decide to file Form 666 with the county office and collect the LDP. Only after this is done can the grain be sold to the elevator.

.

The Secret Is,
There Is No Secret

There are people who would like for producers to believe that, in order for you to be successful marketing your crops, you need some sort of insider information about when and how prices are going to move. These same people are more than happy to provide you with this very information, for a fee of course. There are many different sources out there with many different opinions and price prediction techniques, and almost all of them will be right from time to time. Of course, the opposite is also true.

There is no special secret to successful marketing. In fact, those producers who are enjoying success will tell you that they owe it to personal discipline and consistency rather than to any insider information. That's why we try to keep our message consistent in low prices and high, before, during, and after harvest, all the time. Circumstances change, but the simple and disciplined practices that are the foundation of successful marketing do not.

So, we'll keep on putting out the same message, because we truly believe that the simple alternatives we always talk about are the surest way for you to reach your goals through farming.

Click here to return to the Farmers' Corner index