Ed’s World

Questions & Answers About Grain Marketing

Question: What are some things a grower should consider when choosing a marketing consultant?

Ed replies: I encourage producers to consider hiring a marketing consultant. After all, many have already hired an agronomy specialist, a tax preparer, and a financial planner. It’s a good idea to seek help in areas of management where we are not comfortable with our own level of knowledge and experience.

Producers should try to select a marketing consultant with a similar mindset and approach to marketing as their own.  In other words, if you are a relatively conservative marketer, it probably makes no sense to select a consultant who tends towards hyperactive in the use of options, and someone who likes to re-buy and re-sell often. Find someone who can market your grain in a style that makes sense to you.

In order to assess your consultant’s performance, track a baseline price of cash grain prices in your local market for every crop year. I like to start tracking a baseline price in January (8 months before harvest) and end in June after harvest (10 months after harvest). Now see if your paid consultant can beat that average.

No one can beat the average every year, but if your guy falls short two or three years in a row, it’s time to find another consultant. And don’t forget to take into consideration their transactions costs and marketing fees in the equation. I think the price used to compare to a baseline price should be net of transactions costs and marketing fees. Did I get $3.00 per bushel of corn before or after transactions costs and marketing fees? Depending on the advisor, transactions costs and marketing fees might be 5 cents or 35 cents per year (the active use of options can ring up a large bill quickly).

I also want to note that hiring a marketing consultant is not an excuse for ignorance of market issues, marketing tools, and general trends in the market. You should expect your consultant to be able to explain the strategy in place, share some specifics on price objectives and timing, and to explain the downside of the strategy in place. You should be able to understand every detail. Let them do their work (that’s why you pay them) but know what’s going on in the marketing of your crop.

Got a grain marketing question for Ed Usset? Email him at usset001@umn.edu Read his replies to other questions online at www.cffm.umn.edu – click on the ‘Grain Marketing’ link, and go to Ed’s World.