A grain marketing masterclass
For grain marketers who know there’s always more to learn.
Take your grain marketing game from simple to sophisticated
Selling grain. It’s the only way to make a buck in the business of farming. But let’s be honest – some people love to play the market, and some of us see grain marketing as a necessary evil.
No matter what camp you‘re in, you can probably appreciate the financial and mental benefit of building confidence in your grain marketing skills.
You could cling to profitability at the whim of the market, or with a little help you could turn the tables and have the market serve you.
How much control can you really have? Taking advantage of the market requires planning and vigilance, and even then, weather and commodity prices still seem to remain beyond your control.
But even a small boost to your marketing game can pay dividends, both at the bank and in peace of mind. You just need to be willing to take an honest survey of your own situation, employ some forward thinking and basic planning, learn how to better interpret market intelligence, and stay flexible if you want to make decisions that lead to sustainable profitability.
The Grain Marketing Academy takes you all the way from the basics to more advanced techniques over the course of six lessons. Use every lesson, or only the ones you need.
The best part? No exams!
You know your situation better than anyone. So this part is up to you. Effective grain marketing begins before a bushel is sold. But you need to get it all calculated and recorded to help you make profitable grain marketing decisions.
Doing these four critical homework assignments will pay off later when emotions run high.
This is the only way to know your true break-even levels. Record it all as accurately as possible and remember to include costs that are often overlooked, like equipment payments, taxes and even your time.
Understanding your true costs will help you recognize profitable sales opportunities. But be realistic. While it’s not always possible to achieve the profit you want, it’s key to know your break-evens so you can achieve your goals.
Based on the pricing targets you want to achieve and the commodities you're selling, you will have a number of ways to market your grain to reach those targets, including the cash market, options, and hedging in the futures market. Futures and basis levels, commodity market outlooks, and global and local market factors help determine which is right for each situation.
No two grain marketers will have the same appetite for risk. For you, it comes down to assessing your tolerance for swings in the market (volatility), and the impact on your bottom line.
There are different marketing contracts available with varying levels of complexity and risk, and you sneed to have a firm understanding of how a particular tool or strategy works before making a selling decision.
Too often grain deliveries are either delayed in hopes of a rally or become necessary due to the need for cash flow at a particular time. But you can take control of timing and more easily manage those financial obligations.
Separate grain pricing from delivery by forward pricing a set number of tonnes before harvest when there’s a glut of grain flowing into elevators.
Because grain marketing is cyclical, you can also use historical information to show when basis levels are typically low. Think about basis as a separate pricing decision.
Pro Tip: Set aside a number of tonnes to carry into the summer unpriced to sell during a potential weather rally.
Goal planning should look beyond one year at a time. Develop a three- to five-year plan to help you lay a foundation for long-term success.
If you are working toward a specific goal – say expansion or succession – this may affect your risk tolerance as well. Consider consulting a professional advisor who follows the markets and provides advice for a living.
Make the Grain Marketing Academy part of your plan
You’ve got to do your homework to build a successful grain marketing plan, but we’re happy to lend you our notes. Enroll in the Grain Marketing Academy to get six personalized sets of tips and tricks delivered to your inbox.
Study the Markets
You’ve got your own situation nailed down and you’ve set some goals. But that’s only half the story. Now you need to take stock of what’s going on outside of your home quarter – and around the world.
The grain market is a moving target. Commodity prices can change rapidly, and the factors moving the market this week may become irrelevant the next week. There are plenty of sources of information out there, but with a little help, you can cut through the noise to keep track of what’s more important.
The United States Department of Agriculture (USDA) and Statistics Canada release reports on planting progress and acreage, on-farm stocks and carryout on every commodity produced in North America throughout the year. Who has the time or inclination to track the dates of each report or to decide which ones matter most?
Save yourself the hassle by posting them near your desk or saving them directly to the calendar on your smartphone. The Marketing Academy has made it easy.
Grain merchants and other marketing experts use a language all their own. If you’ve been farming for any length of time, you’re probably somewhat familiar with this jargon, but a little refresher can always help with your marketing decisions. Effective grain marketing begins with speaking the same language. Keep the Marketing Academy Glossary nearby for when the jargon has you stumped.
Commodity prices rely on global supply and demand. Therefore, day-to-day grain marketing decisions depend on collecting and analyzing information about weather, commodity production, politics and the appetite for particular products around the world.
The simplified explanation is that markets rise because buyers are purchasing commodities at higher prices whereas markets fall because sellers are making sales at lower prices. But in reality, it’s far more complicated than that.
You need to understand the interplay between the major grain producing countries and the political decisions that will move a market to help you time your sales.
Correlation is the term used to describe how two commodities or markets move in relation to each other. They can be positively correlated (move up or down together) or negatively correlated (move in opposite directions). Here are some common correlations that might impact your farm:
- Soybean oil vs. canola oil = Positive
- US dollar vs. Canadian dollar = Negative
- Corn vs. Chicago wheat = Positive
- US dollar vs. Grain futures = Negative
- Chicago/Kansas City/Minneapolis Wheat = Positive
Get your cheat sheets from the Grain Marketing Academy
Cheat sheets are a great start, but if you don’t have time to translate every report or study the markets, enroll in the Grain Marketing Academy to get six personalized lessons delivered to your inbox.
Develop good habits
Grain marketing will get your feet on solid ground.
The grain market is a moving target. Commodity prices can change rapidly, and the factors moving the market this week may become irrelevant the next. There are plenty of sources of information out there, but with a little help, you can cut through the noise to stay focused on what’s most important.
Using the information you recorded when you did your homework, include your pricing targets, risk tolerance, cash flow, and ideal delivery schedule, you can determine the short and long-term goals in your grain marketing plan.
But the bigger challenge lies ahead. Executing the plan and staying on track amid a world of uncertainty is the hardest part of grain marketing. Market volatility can be paralyzing when it comes to making a selling decison. You end up watching a rally go all the way up and all the way back down without ever capturing the prices you wrote down as being profitable.
The most disciplined grain marketers are often the most successful.
Marketing Academy tips for maintaining discipline
Constantly revisit your plan. After all, you’re selling three crop years or more at any given time in the season. Be flexible without giving up on the goals yo
Avoid being greedy
Steer clear of the trap of wanting to capture every cent. Your plan should be designed to capture profit. If you abandon the plan and begin stalking the markets
Use percentages instead of bushels. Psychologically, percentages often sound like less of your overall crop than actual tonnes do. As the year progresses, base
Work with a partner
A professional advisor is not emotionally invested in your grain, but they will be invested in your success. They also work with grain markets on a daily basis
Graduate to the Grain Marketing Academy
Stop being a student and become a master grain marketer. Take our entry quiz to enroll in the Grain Marketing Academy and get easy-to-consume lessons delivered to your inbox.