Marketing the ’04 Crop:

A Peek at the Plays of Area Marketing Groups

By Marlene Dufault

Forward Contracting Has Worked Well
I guess I would say there are a couple of simple things that get used more often, that have been in the cycle we are in right now.  The most common thing is selling futures and leaving the basis open on the contracts.

Forward contracting has been the best bet that has worked for us for a couple of years. We have not used puts and calls very much. The futures/options have not worked for us in the last couple of years because of the volatility in the market. The last couple of years with the way the markets have been, marketing has been simple because there is only a couple of minor things that have worked.

My advice to producers is that if they are not in a marketing club, they should get in one. The reason being is that even if you don’t use any of the technical materials in it, just to sit down with other neighbors and find out what is working for them makes a big difference.  

– Dustin Lien, Fargo, N.D. Dustin grows sunflower, wheat, barley, oats, soybeans and corn. His marketing group meets every other week, year-round, with about 6 to 12 members attending at any one time.

Marketing Group Time Well Spent
With the way the markets have been the last few years, I haven’t been able to put together a comparison between what works and what hasn’t. I have in the past made money using options.  In our group, we discuss what has happened in the last week or so, what is going on and what we can do to take advantage of it.    We meet year round, every other week. My advice is that if you feel that you are not taking advantage of the market or not getting the most out of it, I would definitely think about joining a marketing group. It is worth it.

– Eric Egeland, a member of the Fisher, Minn. Northland Marketing Group MN.  Eric grows soybeans, wheat and sugarbeets.

A Help to “Pulling the Sales Trigger”
Our group is an information/educational group. Fortunately for us in Great Falls, we have a lot of grain elevators right here and so some of our members are the grain buyers.  They come and discuss what they see is happening in the markets. 

I do forward contracting and I feel it is working for us.  I do hedge-to-arrive where I set the futures, not the basis.  Some of these turned out pretty good while other didn’t turn out so well.

When we were first learning a lot of this stuff in the marketing club, it was very beneficial. If you weren’t quite certain how the contract worked, we would talk about it or try to find circumstances where a particular contract would be applied.  If I get the information and I feel comfortable to do a move on my own farm, that is great. I have never had a specific direction from the marketing club. The club never pushes to sell at a certain price or anything like that. 

My advice to other producers not in marketing groups is join. The good thing about marketing groups is that you can set them up any way you want. If you are in a group where you feel comfortable enough coming up with a marketing plan and you want to follow that plan, go ahead and do it.

I have found a marketing club very beneficial because it helps you pull the trigger. You find out that other producers have the same questions or same concerns that I do. You find out by discussing with others, that say, $4 is a good target price. We don’t make recommendations to sell at $4, but if I know that some of our neighbors are saying that $4 is pretty good and if it gets up to $3.95, I might pull the trigger a little easier than if I didn’t know what my neighbors were thinking. In my experience, it (marketing club) has helped me actually pull the trigger and make decisions on marketing. We meet year round, except for harvest.

– Will Roehm, a member of the Great Falls, Mont. Marketing Club, who grows wheat and barley.

“More Minds Working Together”
One marketing strategy that looks to prove successful again this year is taking advantage of the futures fixed contract.  We were able to fix some Mpls Dec contracts this spring in around $4.25-$4.50, and where the futures markets have gone now we are back to $3.80 on Dec. So by fixing the futures and basis by Nov. we should start to see a basis come back about that time so that will give a pretty good cash price for those contracts.

Different guys in our club watch different things. Some watch technicals, some watch fundamentals, some watch crops south through early spring.  What has really worked is getting different ideas from the different people in our club, their perspective on things.

Most of us in our club went to the Master Marketer workshops that the Montana Grain Growers Association put on last winter.  It took a lot of us guys to another level and it was a lot of fun. Most of the club was there and it pushed us along to think a little harder about these different areas. We’ve moved into more alternative crops and we are trying to find new avenues to market the peas in our areas and stay up with what the government is doing with PL480 programs on peas.

Marketing clubs are a lot of work and it takes dedication to stick with it and keep at it.  Some times you go to meetings and don’t think anything is going to happen but I always learn something. I am always amazed by what details that maybe I have missed or haven’t thought about that other producers have thought of. It takes more minds working together.  It seems like we are getting fewer producers out here and so we need each other more to bounce off ideas.

– Grant Zerbe, a member of the Lustre Marketing Club, grows mainly spring wheat near Frazer, Mont.

Forward Pricing Works Well, But Not Always
Forward contracting has worked out well for me these past few years. That is the thing that I have learned from the marketing group is to sell crops before harvest, although forward pricing doesn’t always (capture the best price.)  Marketing groups in my opinion make you more aware of what is causing the markets to fluctuate and what to look for. We have had professional speakers come in to speak at our group from time to time.

– Lloyd Fagerstrom, member of the Radium Marketing Group, Warren, Minn. Lloyd grows soybeans and wheat.

Success Negotiating Basis, Forward Pricing
This is such a different scenario this year from what we had last year.  Two things producers in the marketing groups have done and have been very successful with is negotiate for basis on wheat, corn and soybeans as a group rather than individually. The other thing is forward contracting. Forward pricing this year has been a good strategy.  It sure looks right now that it will be a good winner for them. 

The group has looked at different strategies compared to last year.  This year you are going from high prices and really not expecting them to go much higher and hoping that they will stay where they are instead of dropping too much.

Soybeans are our number one crop around here, wheat number two and corn number three. Corn is gaining ground around here though, with more corn acres being planted each year.  We have 30 active members in our group.

I have seen the benefits of farmers who get together and help learn from each other. I would encourage producers to join a marketing club, because I think it is a kind of environment that can foster learning and improving their marketing skills. 

 –Randy Grueneich is facilitator of the Barnes County Marketing Group, Valley City, N.D., and Barnes County extension cropping system specialist.

---------------------------------------

More Info on Marketing Groups

For more information about marketing groups in Minnesota, contact Betsy Jensen, ag commodity instructor, Northland Community and Technical College, by email at betsy.jensen@northlandcollege.edu or by phone, (218) 773-4961. 

In Montana, find more information online at www.montanamarketmanager.org , or contact Alex Offerdahl, Market Manager program coordinator, ph. 406-761-4596. 

In North Dakota, find more information about marketing clubs online at www.ag.ndsu.nodak.edu/aginfo/cropmkt/clubs/clubs.htm , which also has resources for marketing groups.  Or, go to www.ndmarketmanager.org , and click on “education,” then “marketing clubs.” 

Marketing Groups can find a risk management curriculum online at http://trmep.tamu.edu/cg/list.htm . Here, extension economists from Texas A&M and Kansas State have prepared a series of excellent fact sheets to be used as primary educational handouts or to supplement speakers who have covered particular grain marketing or risk management topics.

Starting a Marketing Group
Betsy Jensen, a marketing group coordinator with Northland Community and Technical College, Thief River Falls, says that it can be challenging for farmers to join a marketing group that has been meeting for several years. “Many farmers don’t have the marketing knowledge or skills to join an existing group, but getting involved from day one means you won’t get lost in the discussion, or left behind,” says Jensen.

Those interested in forming a marketing group can find help in doing so online: http://trmep.tamu.edu/cg/overheads/rm2-34oh.pdf (Texas A&M guide to organizing a marketing club) and www.ag.ndsu.nodak.edu/aginfo/cropmkt/clubs/mcinfo.pdf (A guide to organizing a marketing group by NDSU).