Issue 23
Marketing Guide
1999

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 Assocation.

Copyright Prairie
Grains Marketing Guide
Summer 1999

A new interest in marketing clubs

Clubs serve as "peer support groups" and source for market insight

By Tracy Sayler

Mike Lockhart notices that many of the growers who participate in the marketing clubs he leads might arrive at a club meeting "down-in-the-mouth," but depart excited to try new tips and ideas they've picked up.

Lockhart, a Ulen, MN, grower and an instructor with Northland Community Technical College's farm business management program, facilitates marketing clubs in Crookston, Ada, and Red Lake Falls, MN.  As the 1999 harvest was getting underway, growers participating in these clubs were gaining exclusive insight and ideas from guest speakers– and each other– about marketing, farm programs, and other issues related to risk management. 

Insight and ideas such as strategies to make upwards of $6 soybeans.  And that tip from a buyer willing to offer a 30-cent per-bushel premium for corn to ship to Canada.  And learning that it may be possible to cut hailed-out grain for hay and still collect a loan deficiency payment.

Perhaps it's a sign of the times, but there's more interest in marketing clubs lately.  The Minnesota Wheat Research and Promotion Council, which oversees the state's wheat checkoff, helped organize 10 clubs in western Minnesota last winter, joining two more clubs already in operation. 

David Torgerson, executive director of the MWRPC, says more clubs will be developed in western Minnesota this winter.  More information should be available at the MN-ND Wheat and Barley Conference Dec. 6-7 at the Ramada Plaza Suites in Fargo, ND.

Richard Owen, vice president of program development for the Montana Grain Growers Association, says the MGGA has helped organize 21 clubs across Montana.  He describes the marketing clubs as "peer support groups," since they not only help educate producers about marketing, but serve as a conduit for producers to share experiences, good and bad, not just with marketing but with other facets of farming as well.

Keith Banta, a commodity broker with Country Hedging, St. Paul, MN, says Country Hedging will be organizing marketing clubs this fall and winter, working with Cenex-Harvest States grain elevators and others in the Dakotas and Minnesota.

In North Dakota, a new effort involving leaders at North Dakota State University and the state's Farm Business Management program, as well as private cooperators including the North Dakota Grain Growers Assocation, may establish up to 20 marketing clubs statewide (see page 26 for more details).

The Tri-County Marketing Club near Hope, ND is one club that has been meeting since the early 1990s.  Gary Ihry helped organize the club, sponsoring the effort through his local insurance business.  "We realized there was a need for farmers to learn more about marketing," he says.  About a dozen producers became involved initially.  The club still thrives today with about 30 farms represented. "It would get hard to work with if we had more than that," he says.  There's a waiting list for more who want to participate.

 Club members range in age from 20s to 50s.  They meet several times a month, and when they can manage it during planting and harvesting.  "In the fall and winter we meet every two weeks on Saturday morning.  For the Hope crew, that seems to work good."  There's a good amount of fellowship that comes along with the meetings as well.  The club even takes an organized bus trip on occasion to the Twin Cities for ag-related tours "and fun stuff too," says Ihry.

Steve Teaser, a commodity broker and senior vice president with North Star Commodities in Minneapolis, met with the group often during its formative years, and now is a guest speaker about once or twice a year.  "There's probably guys in the club who know more about marketing than I do now," he says.

The clubs serve a key function of "applied education," says Teaser; club members learn and employ strategies they otherwise would not have on their own.  The success and longevity of a club depends not only on club members' willingness to participate, but on key people facilitating club activities.

For the Hope club, that's Mike Kozojed, who farms near Hillsboro, ND.  He says the 10 years he spent working as assistant manager at the Galesburg Elevator has "helped tremendously" with his marketing club efforts.  Along with the Hope marketing club, Kozojed recently helped start another club near Hillsboro.  There's a waiting list to get in that one too.

"One of the keys in making it work is a group of people not intimidated to share ideas and information.  Farmers can be competitors and have 'trade secrets' they might not want to share.  Some have dropped out because they're not comfortable with that.  But, it's openness that makes the club work.  Sharing what's happened to you, and what's worked.  Learning from each other, rather than having to go through it yourself," says Kozojed.

Pooling grain for better profit

When it first began, the Hope club concentrated a lot of its attention on learning about the basis, as well as other market trends and fundamentals.  While some marketing clubs are strictly avenues for information and education, others go a step further, and actually execute strategies as a club.  Members of the Hope marketing club have even gotten to the point where they are pooling grain, marketing it by group decision and distributing any gains evenly amongst those who participate.

In fact, the grain pooled by club members has become so significant at times that they have been able to tender unit trains, and improve their basis by 10 to 15 cents.  "Do that over several thousand bushels, and that turns into real money," says Kozojed.  Pooling helps the local elevator too, which can lock in a certain amount of grain to ship out.  "If you've got 20 to 30 farmers, each controlling 100,000 to 150,000 bushels of grain, you've got a huge resource there.  It's just a matter of how to manage it."

One pool of 300,000 bushels of soybeans earned club members an extra 15 cents per bushel, or an extra $45,000.  "Things like that can happen, but everybody has to get to that comfort level where they can do that together.  It's not going to happen in the first week, maybe even not in the first year."

Local bankers have attended club meetings, which has helped them gain a better understanding of farm marketing: that employing the right hedging strategies can in fact reduce a producer's financial risk, not increase it.  "There's always been that gap, of what the banker's comfort level is.  I think they have become more comfortable it."

Kozojed says the group's joint marketing decisions have resulted in more wins than losses.  "I would say about three-fourths of the things have worked to our advantage.  We've had success in the long run.  I know it's increased the value of money back into members' pockets."