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Changing the Way You Approach Grain Marketing to Reduce Risk (Article)
By: Kurt Lensing, AgStar Assistant Vice President and Industry Specialist
TAGS: Grain, Dairy, Swine, Young, Beginning Farmers
 
January 12, 2017 -

With the 2016 fiscal year behind us, many of us are busy trying to figure out how to fulfill our New Year’s resolutions. Before covering 2017 grain marketing plans/resolutions. I’d like to take a look at 2016 in regards to the price ranges we’ve seen in corn and soybeans over the past year.

Corn prices (before basis) ranged from $3.11 to $4.36, which equates to cash prices about $2.60 to $4.00. Soybean prices (before basis) ranged from $8.62 to $11.82, which equates to cash prices about $7.90 to $11.10. It’s no secret the grain markets are volatile. With a $3.00 swing in soybean prices and $1.25 per bushel in corn prices, grain marketing remains one of the most important aspects of producing a crop.

Do you have a desire to put a plan together to reduce price risk in 2017 for old and new crop? Will you be taking steps to identify tools to help you reduce risk, especially when the market offers you a profitable price? Changing how we think about grain marketing may be the first step.

We’ve surveyed our clients and have found that producers who embrace a “reverse planning” mindset earn higher returns per acre. Reverse planning means starting at the desired end goal and working backwards in order to make intentional choices that ensure you get there.

Leveraging crop insurance products to set an end goal for revenue per acre is a strategy top producers utilize. “Stacking products” or using multiple insurance products can give you more options and give growers greater decision making power.

An example of a different approach would be thinking about selling crops at a profit, which isn’t always the highest price. This means, producers know their margins and don’t just try to guess the high of the marketing year. Here are a few examples of resources we can use to develop a grain marketing plan. Remember, it doesn’t have to be complicated.

  1. Write it down - determine your end goals: consider both time and price, and then document them. For example, if 2017 soybean cash prices hit $9.00 I’ll sell 20% of my expected production. If $9.25 get another 10% sold for a total of 30%.

  2. Start marketing your crop before harvest - take advantage of pricing opportunities over a longer period of time. Have a marketing plan for your crop twelve months before its harvested.

  3. Look at the seasonality of markets - NOBODY can predict markets, everybody can gain access to the historical price and basis movements of corn and soybeans. Use historical statistics to help make your decisions.

  4. Learn about risk management tools - Private insurance products, grain marketing programs offered by end users, brokers, and many other contracts can give you flexibility while reducing risk in your grain marketing plan.

We all know the markets are predictably unpredictable, reducing and managing risk has and continues to be crucial for any business. If you’d like to learn more about how to reduce risk in your grain marketing please contact myself or any other AgStar representative.

For more industry updates,
subscribe to our grain e-newsletter.

 
 
 
 
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Kurt Lensing
AgStar Assistant Vice President and Industry Specialist
Kurt, Assistant Vice President and Industry Specialist at AgStar, helps grain clients and agribusinesses manage commodity risks. Prior to AgStar, he was involved in merchandising and trading of agricultural commodities at grain elevators and oilseed processing plants in the upper Midwest for a multinational grain and processing company. Kurt was raised on a dairy farm in central Minnesota, and received his Bachelor of Science Degree in the study of Agricultural Economics at North Dakota State University. 
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