4 Strategies for Successful Grain Marketing in a Down Cycle

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As most farmers are keenly aware, stocks of major grains have been rising over the last few years and prices have been falling. The USDA is currently reporting world total grains (wheat, coarse grains and milled rice) ending stocks going from:

  • 453 million tonnes at the end of 2012-13, to
  • 513 million tonnes at the end of 2013-14, to
  • 575 million tonnes at the end of 2014-15, to
  • 594 million tonnes at the end of 2015-16, to
  • 605 million tonnes at the end of 2016-17

While not quite as bad, the USDA is reporting oilseed ending stocks going from:

  • 69 million tonnes at the end of 2012-13, to
  • 77 million tonnes at the end of 2013-14, to
  • 92 million tonnes at the end of 2014-15, to
  • 85 million tonnes at the end of 2015-16, to
  • 77 million tonnes at the end of 2016-17

Clearly, this has not been good for crop prices as can be seen in the five year charts for spring wheat, corn and canola.

So, what are the key strategies to successful marketing of your crops in a down market cycle?

The simple answer is knowledge and making good decisions but let’s break this down further into:

  • Know your farm operation
  • Know your farm financials
  • Understand the grain markets
  • Understanding market timing

1. Know Your Farm Operations

While some farmers have this covered off, farmers need to have a good understanding of what they can grow and how to grow it to maximize returns. They also need to understand crop rotations and input requirements to continue to be successful in the years ahead. Many Agri-Trend clients have this covered off with the help of an Agri-Trend agrology coach. Knowing what you can grow and how to grow it to maximize returns is a key to success.

2. Know Your Farm Financials

Another important aspect to a successful marketing strategy is knowing your farm financial numbers and understanding what the numbers mean. Farmers need to be able to identify which crops to grow to maximize returns and to have a sense of what price is required to sell that crop at a profit. Most crops, most of the time, will provide you with a price at some point during the crop year, that allows you to make a profit with that crop. Knowing which crops are profitable and what is a profitable price is another key to successful marketing plan.

3. Understanding the Grain Markets

To have a successful grain marketing strategy farmers need to have a good sense of market fundamentals or have access to someone with an in-depth understanding of the markets. A good market analyst will be able to identify which commodities have the best upside potential, which are likely to remain flat and which crop prices are likely to decline going forward. Good market analysts will be able to tell you what market factors inputs to watch going forward and how these market factors will influence crop price direction. Knowing potential price direction is another key to a successful marketing strategy.

4. Understanding Market Timing

Market timing is a very important aspect of any market strategy especially in times of falling commodity prices. Important aspects of marketing timing is to understand farm cash flow needs, knowing which crops to sell first and which crops to hold, choosing the right pricing vehicle at different time periods during the crop year and knowing when to be aggressive and when to be defensive in terms of setting prices, choosing new cropping ideas and making large capital purchases.

Marketing timing is closely tied with knowing your farm operation, knowing your farm financials and understanding the markets. Farmers need to have a plan to meet cash flow needs and some sense about when is the best time to make crop sales to maximize returns. Agri-trend marketing has had very good success over the last few years in timing sales with higher market prices. Selling in the top 1/3 of a crop’s marketable price range is another key aspect to a successful marketing strategy especially when markets are declining.

 

Email me (lklusa@agritrend.com) or one of the other Agri-Trend Market Coaches for more information or if you need help in developing a successful marketing strategy.

 

About the Author
Lawrence Klusa

Lawrence Klusa is a marketing coach with Agri-Trend Inc. He has spent over 25 years working as an agricultural consultant and grain industry manager - 10 of these years are a commodity risk manager primarily trading wheat futures and options on the US and Canadian futures exchanges. :Lawrence grew up on a farm at Flora, Saskatchewan, He has a BSA with a major in Economics from the University of Saskatchewan and a MBA with major in Finance from the University of Calgary. He can be reached at iklusa@agritrend.com.


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