Issue 31
Marketing Guide 2000
 

Prairie Grains is the official publication of the Minnesota Association of Wheat Growers, North Dakota Grain Growers Association, South Dakota Wheat, Inc. and the Minnesota Barley Growers Association.

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Prairie Grains Marketing Guide 2000

Producers share insight on marketing

By Dorinda Anderson

It's not surprising why producer interest in marketing clubs has picked up in recent years. For producers to talk to each other about the ups and downs of marketing and what's working and what's not is well, almost therapeutic. And, the sharing of key marketing tips and information can be quite valuable. Along that same line of learning from each other, we asked a few producers from North Dakota and Minnesota for some of their marketing insight. Some of their recommendations:

Strive for cleaner grain
John Cook is in the process of setting up a grain cleaning system on his farm near Mohall, ND, as testing has indicated he can get a better price selling grain cleaned on his farm, as opposed to hauling uncleaned grain into the elevator with more dockage.

Cook is also involved in a commodity club. "One benefit from that is we get to talk about crop conditions, farm program issues and insurance issues and it helps you get a little better handle on how things are going," he says. Cook follows the Winnipeg futures market for canola to help guide his marketing options.

Know your breakeven
Know what your breakeven point is so you can market accordingly, says Mark Gage, Page, ND. "That will be different for every producer. Make sure you can cover your expenses and hopefully you will get enough profit. When the price hits your breakeven point you'd better be looking to do something with it."

Sell wheat by Christmas
The cropland where Charles Piekarski used to grow wheat on his farm near Fergus Falls, MN, is now corn. "When I used to market wheat I didn't want to sell right at harvest because of the discounts and the protein docks…unless there was a super kind of protein premium being paid or if I had great protein. So I held it until around Dec. 1. But I always sold it by Christmas. I tried to pick a price and sell it when the market hit that price… If I jumped around I got burned. It seemed like the price never got a whole lot better after Christmas."

Play the LDPs, diversify
"Play the LDP game and take advantage of those five minute opportunities you have. There are opportunities but they are very small," says Lowell Berntson, Kulm, ND. "Watch for strength in basis and lock in a price when you can and lock in the best LDP. Split up the pricing game in 3 or 4 pieces." Berntson says he also believes in diversification. "We hope something works out. Diversification splits the risk."

Take advantage of a strong basis
"The single factor we use is to have a strong basis," says Allan Skogen, Valley City, ND. "Selling cash on basis allows us to get the best premium. Then sell futures at a separate point in time, because they generally peak at a different time of year."

Try to sell it before you plant it
"For 3 of 4 years I've sold before I've planted. Then at harvest I put it in the bin, take an LDP and sell cash wheat in the last week of October or first of week of November. I'm generally in the top percentile of sales for the year," says a McHenry, ND producer who preferred that his name not be used. "If you have no storage and are forced to sell at harvest, I guess you could buy it back with futures or a call option. Once the crop is in, you can shop around and market your crop."

Follow a plan, use the right tools
Charles Swanson, who farms near Hallock, MN, stresses that he believes it is important to never put all your eggs in one basket. Look at the array of marketing tools and see which make more sense for the present situation.

"For example, last year we used futures and options on the out months, so they were paying you for storing your grain. And we were coupling that with LDPs and using futures for December or March. That worked about the best last year. And we used some put options." This year, Swanson says if the market bottoms at harvest he will look at just taking the LDP.

He stresses the importance of having a written marketing plan "that is probably executed by your wife, because we get too emotional." It could also be executed by a marketer or financial advisor, "someone who makes you follow through," he adds.

"You don't want to be in a position where you have to sell when you need cash," says Swanson. "You want to do it according to a plan. You can never pick the top of the market, so LDP and forward pricing is what you will end up having to do."

Don't get greedy|
"Don't expect to be at the top all the time. Sell a little all the time," says Jerry Hasnedl, St. Hilaire, MN. "For myself, if I have a problem (with marketing) then I need to have someone help me with a plan that is structured. I get greedy and that makes me wait too long to sell."

Join a marketing club
"I definitely recommend that people get in a marketing club for more reassurance and to look at things from another person's perspective. It's a chance to bounce ideas off of other people and see what farm business management instructors think the market will do," says Kyle Mehrkens, who farms near Thief River Falls, MN.

Because of being in the club, Mehrkens says he has ventured into a deal where he has locked in a wheat price that is about $1 over loan rate, and a corn price that is about 70 cents over loan. He says he also believes that it is important to watch the seasonal trends, and that futures and basis are two separate things that don't have to be locked in at the same time.