Harvest is wrapping up and farmers again have time to focus on marketing. Make time to brush up on grain marketing and be mindful of marketing not only the crop you just harvested, but also your planned 2026 crop.
What’s happened
With grain prices inching higher off historically low prices, producers have been focusing on how to tweak and update their marketing plans to best capitalize on current opportunities while being mindful of potential future opportunities.
Here are the top five factors you need to know to best help you enhance your grain marketing.
From a marketing perspective
As farmers spend time in the office focusing on accounting and spreadsheets, this is also the opportunity to get prepared with your marketing.
Know your cost of production
A critical first task is to understand your cost of production. Seed, chemical, crop insurance, fertilizer, repairs, transportation costs, interest costs, machine costs, labor, and land expense all add up.
Be honest with yourself. It can be tempting to overestimate grain prices (or what you think future prices could be) and underestimate the amount of price risk your farm is actually exposed to based on input costs. Take a look at the true cost to put your crop into the ground.
Understand how much it costs you to produce that bushel of grain. Without knowing the cost of production, you are basically gambling on whether the commodity you are producing is going to have value.
Not sure how to get started? A simple internet search for sample marketing plans and spreadsheets can be found through several state Extension service websites.
Understand your local basis
The Board price in Chicago and what you are able to receive in your local cash market can reflect dramatically different price points. Basis is the difference between your local cash price and what the Chicago Board of Trade is projecting grain values to be worth.
Basis also tends to fluctuate throughout the crop year. If you regularly track basis in your local cash market, you’ll have a good expectation about what changes you will see throughout the marketing year, and will be able to capitalize on those movements, which can add nickels and dimes to your pocketbook.
Scenario plan for potential price moves
With the government still shut down, and USDA reports lacking, there is little fresh news to help dictate price direction. News of a trade deal with China has been supportive to soybean prices. However, the lack of weekly export sales data has us in the dark regarding export demand. The market is waiting for fresh news regarding demand, global politics, potential planted acres for spring, weather in South America and revelations of what the next WASDE report might say.
Looking at charts, grain prices could easily run if the underlying fundamental news leans bullish. Or prices could easily fall substantially lower if the news becomes “dull” or lackluster. Weighing the potential scenarios, you need to decide whether it is worthwhile for you to pull the trigger now on cash sales. You also need to decide what to do if the market rallies: Where are your next targets for sales, and how much will you plan to sell? Vice versa, if the market starts to fall lower, will you have the discipline to make the cash sale, even though prices are starting to fall?
Acknowledge your constraints
In other words, learn from experience and pinpoint what is holding you back from your best marketing efforts. Some producers do not feel they have enough understanding of what affects grain price movement, so they are working with a trusted advisor to gain that marketing knowledge. Other farmers say they have trouble “pulling the trigger” on sales when “they know they ought to,” so figure out who can help you with accountability for the sales.
Sometimes, past issues or “sour feelings” of selling “too soon” or selling “too late” can make a producer just stop in their tracks with their current marketing plan. This can lead to apathy or no future plan, because you’re still writhing in angst from a previous “poor” sale. The alternative is to look at marketing tools like puts that can protect downside risk if you’re waiting to see if prices will rise and consider calls for sales you are making to avoid sellers’ remorse, which allows you to still partake in a rally.
It's a global crop
Grain marketing has evolved and is not as simple as looking out your back door to understand where grain prices may trade. In this global marketplace, you need to daily monitor daily geopolitical events, global production, global demand, freight costs, seasonal price action of commodities and outside market influences, such as crude oil or currency exchange rates. Also, watch the fund money in the marketplace.
Prepare yourself
While that watch list may seem daunting, this is what the best of the best grain producers are doing. Grain marketing is a process that is dependent on a wide, ever-evolving set of circumstances. Yet, with a consistent and disciplined approach, you will gain confidence in your skills. Creating a plan now plays a crucial role in avoiding the pitfalls of a wait-and-see approach to grain marketing.
It’s often been said that failing to plan is planning to fail. This can also ring true for grain marketing. Taking the wait-and-see approach can lead to lower average prices over time. Plan now to give your family farm the greatest opportunity to capture a higher price average.