DON’T CALL ME AN EXPERT
This is just the way I do things

Marketing Grain Online

by Alan Grunhovd

Our farm consists of 600 acres on which we raise corn, soybeans, wheat, and alfalfa near Fertile, Minn.  We also have a 70 head dairy operation and raise all our own replacement heifers. Involved in the operation are Danny and Nancy, my parents. My wife Brenda helps out when needed, but stays very busy with her beauty salon and our 9 month old daughter, Ava. My grandfather Ray does most of our tillage in the spring and fall.

The workload on our farm is split up very evenly.  Both dad and I can do all of the chores with the dairy, and field crops.  My mother helps with feeding the cows, baby calves, and is our bookkeeper.  When I returned home from college eight years ago, I took on the responsibilities in several areas.  I take care of all of the breeding decisions for our dairy herd.  I also decide what to plant, and manage the planting and harvesting of our crops.  I was also put in charge of the marketing of our crops and milk.

Up until then our marketing had been very limited, for really all of the commodities we produce.  We did not contract any grain, and either sold at harvest or stored it.  Options and futures fixed contracts are the main tools I use to do marketing of our commodities.  I check the markets on the Internet once or twice during the day.  I receive information about market direction from the radio and a daily email we receive from our broker.

Milk, wheat, and soybeans are the main commodities that we market. We usually have around 100 acres of grain corn and 60 acres of corn silage. The majority of the grain corn is fed to the cows and we only sell when we have extra. When it comes to wheat and soybeans I try to be about half to two -thirds sold by harvest. To do this I mainly have been using futures fixed contracts, because our bushel amounts are fairly small.  All our contracts are sold in 1,000 bushel increments.

One of our most important tools is a simple spreadsheet I made.  My parents have been involved in the Farm Management program for many years.  So to give me a good grasp of our cost of production, I took our enterprise analysis and entered them into a spreadsheet. Then I took cost of production and averaged it over the years.  I use this number as a benchmark when to start pulling the trigger on when to start making sales. This has been a good tool that helps keep me from making sales that I can’t make a profit on.

About a year ago I started to use Internet marketing.  We received a letter from the Farmers Co-op. Elevator, Winger, about a new Internet marketing service they were looking to implement.  They had a meeting so I went to see what is was all about. At this meeting I met James Tatge of Farms Technology .  He told us about his DPP (dynamic pricing platform) Internet marketing program.

After listening to his program it didn’t take long to be sold on this program and the advantages it would have to my marketing program.  What you do is submit a price for your contract to the elevator over the DPP. This lets your elevator manager know at what price and how many bushels you want to sell. The contract is filled when your price is met. The program allows you to do cash, futures fixed, and basis contracts.

That was how I was introduced to the program.  I went home and signed up for it on my computer. To begin I just explored the program a little bit. I found it very easy to use, it led you through step by step.  It also has some fairly nice features.  It has a very good graphing program that I have found useful.  I had been trying to graph our local basis before, but had a hard time finding time.  I just went into the DPP and could pull it up.  It also has delayed futures market quotes. Another nice feature helps you figure out your hauling costs from the farm to a destination.  It didn’t take very long and I felt really comfortable using DPP.

So I decided to make my first contract. I went into the program and set a price on 1,000 bushels of soybeans, and then submitted it. It then goes to my elevator manager who approves it and then it enters the system.  When the price at the elevator matches up with your price, the contract fills.  This first contract took a good month to fill, but it worked really well. So last spring and summer I did all our forward contracts for wheat and soybeans using the DPP. We have a limited amount of bin storage, so the majority of our crops are sold off the field at harvest.  Then I usually re-own the bushels with a call. 

The main reason I decided to try to use this is what I believe is the biggest advantage, time management.  By using the Internet I can make my market decisions after elevator hours.  I usually end up entering my contracts in the evening after doing chores.  Once I have set the price and the contract is approved, it stays on the program for a month. I then get an email if the order fills or before the month is out to tell me I have to extend the order.  If the order fills, I then receive the contract in the mail from the elevator in a few days.  This gives me the freedom to do my marketing when I have time and not just when the elevator is open.

Another advantage in my opinion is that it helps me do a better job marketing. I take my cost of production and figure in a profit. I then enter my price contract into the Internet marketing and basically don’t worry about it.   It keeps me from changing my mind.  Sometimes just talking to other people will lead to misinformation and make you question your decision.  By doing it online, I make my decision, lock in a profit, and live with it. 

There is no greater risk doing this online then if you submitted the order directly through your elevator manager. Once he approves it is just like if you went and did it on paper right away.  Cost is $.01 per bushel.  To me it is definitely worth $10 or $50 to be able to do my contracts at any time.  I feel my time and the ability to have better communication with my elevator manager is much more valuable than this cost

The main disadvantage I see so far is the small number of elevators taking part. If there were more elevators doing this, it would be even better for us as farmers. That’s because a unique part of this program is that you can submit a contract to multiple elevators.  When the contract fills at one elevator, it automatically cancels the other contracts. Right now only one elevator I do business with is online. If more elevators were online, we would have more opportunities to get contracts filled. So if this interests you, contact your elevator and try to get them to go online. You also can check it out on the Internet at www.farmstech.com.