Farmers' Corner September Issue Index

The last few years have been a wild ride, no doubt about it. We've seen prices at both ends of the spectrum and everywhere in between.

So, what to do about all of this? There have been years, even fairly recent years, when anyone who held on to grain after harvest came out pretty good. That same strategy this year proved disastrous.

What can we learn from all of this? Probably many things, but perhaps most important is that, no matter where prices for a crop start or where they end up, there is some point at which a profitable price is available before harvest time. This statement has very few exceptions.

The price in question is rarely the high or the low of the market, it is usually somewhere in between. Sometimes it will be closer to the high than others, and the opposite is also true. What you can depend on is that it will return a profit to your farming operation.

This profit is what will keep your business going year after year.

Take some time to examine your marketing decisions over the past few years -- are you satisfied with the results? Then, determine your average production costs & yields for the same period of time, and come up with a target price based on a specific level of profit per acre. Could you have done better by selling at that price than by doing whatever you did? More importantly, was that price available for the last few years? The answer may surprise you.

Getting caught up in market movements and price prediction is a dangerous game that can make you rich or make you bankrupt just as easily. Consistency and discipline will pay off in the form of steady profits. When you make marketing decisions, don't forget to keep your long-term goals in sight. They're more important than the short-term motivations that can get you off course.

There are those who recommend taking the LDP payment, then storing grain in anticipation of higher prices to come after harvest. Beware--this is a dangerous tactic that has cost many producers dearly on '98 crops. There is absolutely no downside protection, and the last thing you need now is to expose yourself to the possibility of lower prices.

If you stay in the market after harvest, please do it with protection against lower prices. We don't know where prices will go (and neither does anyone else, really) but we do know that the costs of storage and interest often outweigh any price increase. Whatever you decide, we hope you'll think carefully before removing your protection against lower prices.

Marketing vs. Sellers

Marketers:

Have a specific price goal each year, and more often than not reach that goal.
Are in control of their decisions--sell when they want to, not when they have to.
Are comfortable with a good sale.
Have a specific standard by which they determine what a good price is.

Sellers:

Have no specific goal, just want to sell at a "good price."
Usually sell when they need the money.
Are always worried the market might go higher after they sell, whether it was a good sale or not.
Have no standard for judging prices -- a "good price" is always a little higher than wherever the market is now.

Which one are you?

Minimum Price Works Every Time

Have you ever used a Minimum Price Contract at harvest and felt like you got burned because the price went down instead of up? If you look back at the circumstances surrounding your decision to use Minimum Price, you'll see that it most likely did work quite well. If you purchased Minimum Price at harvest, you did so because you wanted to stay in the market after harvest. The only other way to do it would have been to delay your selling decision by using storage or DP.

If the price goes down with Minimum Price, your result is the cash price you received at harvest less Minimum Price fees. If you had put grain on storage instead, your end result would be a lower cash price less storage and interest costs. Minimum Price at harvest helps you do the right thing, which is turn grain into money at harvest, end downside risk, put a cap on extra costs, and take yourself out of the price prediction game that can make it almost impossible to make a clear decision.

Did You Leave Money On The
Table This Year?

Do What You Can To Keep It
From Happening Again

What's Really Important?

If you have long-term plans and goals, your most important job is to be in business year after year. This will require that you make enough money to stay in business. In other words, you need to consistently sell at a price that pays your costs of production plus a reasonable margin. This is a fundamental principle of economics that drives businesses of every size and classification.

Eliminating Distractions

There are myriad ways to lose focus if you are not vigilant about sticking to your short and long term goals. The constantly fluctuating market is distracting enough, let alone the countless voices offering advice, prediction, criticism, etc. You must be singleminded about your most basic and urgent objective -- selling at a profit.

Until your grain is sold, distractions are a constant danger. Remember, the most important financial goals you have will be reached by a lifetime of good marketing decisions, not any isolated instances of selling at a spectacular price.

Think Outside The Box

If you've been less than satisfied with the outcome of your marketing efforts, it may take some radical thinking to get different results. "If you do what you've always done, you'll get what you've always got" -- that's an old saying with a lot of truth to it.

Radical thinking doesn't necessarily mean that selling your grain will be more complicated; in fact, maybe you need to simplify your approach. Doing things differently can be uncomfortable at first, but what's comfortable isn't always what's best.

Be Ready When The Market Is

Many successful marketers have learned that it works best to turn grain into money as soon as possible. This almost always involves selling ahead at a profitable price and collecting a check at harvest time. There is a mindset that says, "I can't sell what I haven't got yet", but the fact is that most businesses do just that. At the most basic level, it makes good sense to have a contract for a product in hand before it's produced, rather than producing something and then seeing what you can get for it.

"But. . ."

There are justifiable concerns about selling a crop that isn't grown yet, but you can include the flexibility to deal with whatever your concerns are. We can work with you to develop a customized plan that will help you take advantage of profitable prices and provide a safety net so you can rest easy.

No Time Like The Present

Prices aren't real attractive right now, but success at selling profitably is a matter of knowing what you want and being in the market early. Think of it this way -- the best way to fish isn't to wait until you see a fish and then plunk a worm down in front of it, or wait until it swims by and then try to follow it; the bait needs to be in the water waiting for the fish to swim by.

If you need help getting started, stop in and see us. We'll be glad to help you put together a plan for marketing your crops at a profit. Remember, profit starts on the farm. We can't prosper unless you do, and our community can't prosper unless we both do.

Let's get started right away.

Walking the Walk

Have you ever thought, "That's easy for them to say" as you listened to us go on and on about Target Contracts, selling ahead, locking in a profit, being happy with a sale even if the price goes up afterward, and so on? After all, you're the one who has to do all those things, while we just talk about them, right? Well, not exactly.

It is absolutely imperative to the success of our business that we make selling decisions in the same way we encourage you to do it. We have to set a specific value on the grain we handle, then be ready to lock that value in when it is available. Often this means selling grain before it is to be delivered. We have to be willing to pull the trigger ahead of time and be comfortable with the results.

We cannot be successful unless we set specific goals and work hard to reach them. It's not always the easy thing to do (and we know that you feel the same way), but it is always the right thing to do, and the long-term outcome is much more rewarding than if we marketed our grain without a plan.

We just thought you'd like to know that when we offer marketing advice, we're not trying to get you to do anything that we don't try to do ourselves.

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