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Taming the Bulls & Bears
Marketing resolutions for a new year
By Betsy Jensen
It’s very easy to look back at 2000 and see the grain sales you should
have made. Hindsight is always 20/20, but now it’s time to look ahead at 2001 and try to learn from your experiences in 2000.
Regardless of how well you did in 2000, there’s always room for improvement in 2001. In grain marketing, you need to set targets and goals but more importantly: Stick with them. Many farmers are still
holding the 2000 crop and it may be difficult to look ahead to 2001 sales, but the carrying charge encourages forward contracting. Before you begin making sales, write down some targets and goals—new years
resolutions, if you will—and then more importantly, stick with them.
1) Determine your break-even prices.
You need to know exactly at what price it is profitable to sell your crop. If your wheat break-even price is $3.25, you should make your first sale
above that price. It’s much easier to make grain sales if you know you are locking in a profit. Unfortunately with the current level of prices, not every commodity is profitable to produce, but this information is
still valuable.
2) Determine your cash flow needs.
Too often, farmers sell grain because they need cash, and not because prices are favorable. There are many costs that you can mark on a calendar right
now such as land rent, taxes and machinery payments. You need to plan ahead for these cash flow needs. If you need to pay land rent on Sept 15, make sure you have something forward contracted at a price you choose,
instead of waiting until Sept 14 and taking the price offered at your elevator.
3) Set your price targets and stick with them.
If you would be willing to sell 20% of your wheat at $3.50 cash, then be sure to make a sale there. You need to set price targets and also time
targets. With the huge carrying charge, forward contracting is very attractive. For the past few years, forward contracting ahead of harvest has been profitable, even if it is only 25%.
4) Sell grain in increments.
Don’t try to hold every bushel for the market high. You probably won’t hit the top anyway, and you’ll more than likely end up selling at the bottom. Set
targets such as selling 15% at $3.25 and 25% at $3.50. If you don’t hit those price targets, use your timeline deadlines instead, such as to sell 25% by May 1.
5) Use weather scares as selling opportunities.
Weather scares can cause major increases in prices, but the prices can fall just as quickly. Most weather scares never amount to anything, but
it does give you a brief time period in which you can take advantage of the market’s fear. Judging by the past few years, the winter wheat crop seems to have nine lives. It freezes, gets planted in dust, gets too
much rain and anything else that Mother Nature can throw at it, but they’ve had over 40-bushel average yields for the past 4 years. Use any rally to make sales instead of becoming bullish. If the market continues to
rally, you can always sell more wheat, even for next year’s crop.
6) If you change your marketing plan, make sure you have a legitimate reason.
Market conditions do change throughout the year, so you will probably have to modify your price targets. But
don’t change them every other week. One, maybe two revisions are really all you should do. Before you make any changes, make sure the market conditions have legitimately changed. Is the winter wheat crop really
smaller than expected, or is it just another weather scare?
7) Learn from your mistakes.
Instead of kicking yourself after a poor marketing move, try to learn from it and make sure you don’t make the same mistake next year.
Everyone makes mistakes in marketing, but the better marketers learn from their mistakes and move on. Expect improvement, not perfection from yourself.
It’s never too early to begin selling your 2001 crop, even if the bins are still busting with the 2000 crop. With LDP’s a major component of your selling price, it makes grain marketing more difficult.
Will there be an LDP or not? Can I afford to sell wheat at $3.25 cash if I don’t have a 75-cent LDP this fall? You need to answer that question yourself but remember: Even if you contract 25% of your crop, you still
have 75% available to take advantage of higher prices.
“Taming the Bulls and Bears” is a market education feature of Prairie Grains, made possible by the Minnesota wheat checkoff managed by the Minnesota Wheat
Research and Promotion Council. If you have a question or topic related to marketing that you’d like to see addressed in this feature, send it to: Minnesota
Wheat Council, Attn: Prairie Grains editor, 2600 Wheat Drive, Red Lake Falls, MN, 56750. Phone: 1-800-242-6118. Or email Jensen: bjensen@ nctc.mnscu.edu
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