“I’m Not an Expert – This Is Just the Way I Do Things”

How I Go About the Business Of Selling My Grain

By Tim Dufault

First off, I don’t think I am  an expert of any sort when it comes to grain marketing. Just ask my elevator manager, broker or banker. But they (this magazine) wanted an average producer’s perspective and that is me, average, so take this for what it’s worth.

I’ll break this down into three parts:

1) On what do I base my selling decisions,

2) Where do I get my market information, and

3) What strategies do I use or not use

Market Decisions
The first piece of information I need to know when selling is what my cost of production is. I can’t sell something if I don’t know what it cost me. 

Knowing what a bushel of wheat cost me to produce makes pulling the “sales trigger” a lot easier.  $3.50 a bushel wheat might not be the best price .  But if I know my cost of production is $2.90, I can sell at a 20% profit. That works for me.

Calculating cost of production is a little tricky. It’s more than seed, rent, and fertilizer.  It’s repairs, ownership costs, family living, and interest. And the number keeps floating around until after harvest when you know what your actual yield is to base it against.

With good record keeping from past years and realistic yield projections, a grower can project a base cost of projection to start marketing the next crop at budgeting time. FBM (Farm Business Management) instructors are great to help a growers calculate true cost.

Cash flow is another factor. I want to sell grain when I want to. Not when I have to. By knowing when my farm needs to generate cash, it will allow me to grab price bumps prior to those times.

The grain markets have certain times when they usually put in their highs and lows, or seasonal price patterns.  Prices are typically weak at harvest with later post- harvest rallies. Concerns with spring planting delays and summer weather scares cause prices to generally top during those time frames.

These seasonal patterns are not hard and fast. However, they do give us an annual road map of price trends. I like to sell grain in the March-April time frame and again in mid-summer. I can usually get some decent prices then. If I can’t, well, the rest of the year usually won’t fare any better.

Market Information Sources
So, where do I get my marketing information to base my decisions on? From as many sources as possible!  Just as the farmer who only listens to one TV weatherman and thinks all weather forecasts are only half right, having only one market source will have you short in the bull market quicker then you can say “margin call.”

I subscribe, and read, two daily market newsletters, plus the comments on DTN. Throughout the day, I have one ear glued to the radio.  Not just for what prices are doing, but for what the traders are talking about. The Red River Farm Network is great for getting many different sources during any given day. This helps to build a true picture of the markets’ direction.

I make calls or e-mail and try to pick the brains of the experts.  Elevator managers, grain brokers, market advisors and extension educators all have something to contribute which gives me more confidence to sell grain.

I’m not sure where I sit as far as time spent on marketing compared to other farmers. I suppose some guys spend more time than I do, and others spend less.  But, I don’t think the time I spend on getting marketing information is time lost anywhere else in my operation. I have the radio on in the tractor or shop.  When I’m in and out of the house, it’s only a few clicks to check DTN. And, at night when I finally pull the plug and I’m kicking up my feet, I can read the market newsletter.

Preferred strategies
So, what strategies have or have not worked for me?  Well, I’m not a big fan of options.  I hate spending money on premiums that usually expire worthless. If I use futures and watch it close, any loss is usually less than the premium would have been. I’m not a fan of storing grain either. I like cash. So, instead of putting grain in the bin and selling it pre-harvest later on rallies, I would rather price it on rallies and deliver it at harvest.  Sure helps with the cash flow.

The last few years, I have priced grain before planting, on those seasonal peaks, for harvest delivery. I’ll use either hedge-to-arrive, basis fix or a forward sale.  It all depends on the year. In the summer months as my crop yield is becoming more defined, I may price more. At harvest, any bushels that aren’t sold and I don’t want to store, I’ll haul it to the elevator and maybe delay price them to keep storage costs down. Then, sell on any after-market jump in prices.

So that’s a little bit about how I go about selling my crop. It may be similar to what you do or maybe not. When it comes to grain marketing, just remember, there is no one right way.

Dufault farms near Crookston, Minn.

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“I’m Not an Expert – This Is Just the Way I Do Things” New Prairie Grains Column

“I’m Not an Expert – This Is Just the Way I Do Things” is a new feature column in Prairie Grains, replacing the column by Zach Fore, who has moved as extension cropping systems specialist with the University of Minnesota to a job with a seed company as a sales agronomist.  Thanks for the many years of insight, Zach, and best of luck with your new venture.

We hope the new column “I’m Not an Expert – This Is Just the Way I Do Things” will help crop producers share ideas with other crop producers, to spark new insight or reaffirm what you’re already doing. Each column will feature a different producer’s perspective on a specific topic.  If there’s something you’re doing that’s working out well (or hasn’t worked so well), or if you know of a producer with a good perspective on a certain topic – whether it be producing no-till, growing a certain crop, using precision ag techniques, weed/disease control, boosting crop yield/quality or selling grain – we’d love to hear from you.  Contact Tracy Sayler, tsayler@prairieagcomm.com or ph 701-347-5930.