That corn has been sitting in bins for two years...
When it was first harvested, it was worth $8 a bushel. You held out a little longer, hoping for a little more value, but today it’s worth $3. The money lost is staggering: if you have a million bushels stored away, you’ve lost the equivalent of about 50 Lamborghini tractors.
That becomes your story when you wait too long to sell.
Bottom line: you need a grain marketing plan. It’s the only way to protect yourself from getting too greedy...
Here are five things you need to do to establish an effective grain marketing plan.
1) Know your inventory for old and new crop
You need to know exactly how much you have of every commodity. If you have 62,792 bushels of corn, every one should be accounted for.
You also need an accurate forecast of the crop you’re going to grow.
If you know your entire inventory, old and new, you’ll know exactly how much you can sell the next time an opportunity arises.
2) Break old and new crop into marketable units
Break your inventory into marketable units. If you have 100,000 bushels of corn, make them 5 units of 20,000.
Separate units take emotion out of the process. They’re market-ready bundles that reflect a certain mindset: “As soon as I have the opportunity to hit my target, I’m going to sell.”
With this strategy in your grain marketing plan, you won’t get caught waiting around for higher prices that never come.
3) Determine pre-harvest and post-harvest cash flow needs
You have your overhead expenses (utilities, etc.), but you also have giant ones that come once or twice a year, usually in line with pre-harvest or post-harvest.
A good grain marketing plan pays special attention to those seasons.
Ask yourself, “How much cash do I need at each particular time of year?” Once you have that figure, you’ll be less inclined to sit on your grain. You’ll sell whatever will help you hit your threshold by the deadline.
4) Set time-bound price targets for each marketable unit of grain
In fact, setting a time-bound price target is something you should be doing all year round.
Say you make a plan: every quarter you want to sell 25,000 bushels of soybeans, and you want $4-$5 for each.
If you can sell them for $4, even at the very beginning of the quarter, you should do it because you’ll match your target. And if the market never reaches that target, sell your grain within a week of the quarter’s end, whatever the price.
Sometimes you’ll sell below the cost of production; sometimes you’ll be OK. Either way, you have recurring cash flow needs that must be met.
So meet them.
5) Set basis targets for each marketable unit of grain
If everyone has a ton of crop, the elevator is going to raise the basis to prevent an overflow.
And, you guessed it, you should have a target for the basis price, too.
If you’re comfortable selling at a basis of $.40, don’t get greedy: just do it. The basis might only relax for a short two-week period, but if you’re aware of that opportunity you should lock in that grain.
How Cash Cow helps:
We track everything for farmers building a grain marketing plan. We have a rolling total of how much grain they have, both forecasted and unsold. If they sell grain, the price comes out of the unsold inventory.
Really, we help with every one of the five steps above. We predict what each marketable unit will bring for profit, and we help farmers determine the right target prices for the profit they want. We can tell you exactly how much you need to get into black from the red.
We’re here to help with the details, but it’s also good to remember the big picture:
Make a plan --- then execute, execute, execute.
Planning to plan? We want to help you transform your farming into steady cash flow. You can sign up for a 30-day, trial below.
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