Issue 24
Prairie Grains Magazine
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 Magazine
Nov/Dec  1999

Self-discipline, realistic goals are keys to successful grain marketing

Strive for an above-average price when marketing grain. Take a profit
 when you can or avoid a huge loss if you can. That's more realistic than trying to guess the market high, says Jim Nesseth, educator in Jackson County with the University of Minnesota Extension Service.

"Human nature promotes going for the `home runs' in pricing one's grain," notes Nesseth. "However, `home run' prices only happen rarely and few people are in a position to take advantage of them. Establishing a `keep you in business' marketing plan has a much higher probability of putting more dollars in your pocket."

Nesseth cites figures from U of M Extension farm management specialist Erlin Weness. The figures show that for a 600-acre southern Minnesota corn and soybean farm with average yields, increasing the selling price five percent can increase annual profit by $10,000.

"There is a great opportunity today to use many different marketing tools and information sources," says Nesseth. "The key is to let them work for you and not confuse you. Self-discipline and realistic objectives are critical."

Nesseth suggests some basic steps in developing a marketing plan:

•  Set a price goal that covers production expenses plus a realistic allowance for family living expenses. Some years this may not even be possible. However, if you don't set a price goal and sell at that price you may never sell, but will continue to wait for a higher price. It is nearly impossible, emotionally, to sell on a day the price goes down.

•  Know storage costs — storing harvested crops is highly expensive. Have a clear understanding of the costs and turn production into cash as soon as possible to avoid interest on grain and possible price depreciation. Be aware of the risks of fire, wind, spoilage, insects, rodents, spillage, and theft.

•  Set up your marketing plan in advance, up to a year before the production year.

•  Set target prices at which you will sell a certain percentage of the crop, and as better prices materialize, more increments of the crop. You always need a backup plan if price levels never occur. A backup plan might be based on time or dates of USDA crop reports to guarantee you sell the crop near or at normal seasonal highs. Don't let a year such as 1998 happen again without pricing any grain.

Understand basics when marketing grain

Most grain producers don't have time to thoroughly analyze price charts from the past when marketing their crops. However, to be a good marketer, Nesseth says, it's important to understand key basic factors:

•  The cash market price offered today and future prices offered for the near term and up to 18 months from today.

The seasonal tendency of prices in long and short crop years.

•  The historic price level. Are we in the top 20 percent of the price range or the bottom 20 percent?

•  Basis levels (the difference between futures and cash markets) and what they mean.

•  Crop size, utilization, and carryover (the fundamentals).

•  Marketing tools that are available and which ones fit the situation.

"Taming the Bulls and Bears" is a market education feature of Prairie Grains, made possible by the Minnesota wheat checkoff administered by the Minnesota Wheat Research & Promotion Council.  If you have a question or topic you'd like to see addressed in this feature, send it to: MWRPC, 2600 Wheat Drive, Red Lake Falls, MN, 56750.  Phone: 1-800-242-6118.  Email: mnwheat @ means.net.