Simplifying Grain Marketing

In his book, “Grain Marketing is Simple (It’s Just Not Easy),” Ed Usset, a seasoned grain marketing economist at the University of Minnesota, shares valuable insights on simplifying the intricacies of grain marketing. I resonate with Usset’s approach and appreciate his emphasis on keeping things straightforward. Borrowing from that grain marketing wisdom, let’s zero in on a key aspect: pre-harvest marketing, specifically new crop sales for 2024. Join me as we explore strategies and actionable advice to navigate this vital facet of grain marketing. 

As farmers gear up for the upcoming growing season, they are making crucial decisions about crop inputs. Fertilizers, seeds, chemicals and even land costs are often secured and paid for months before planting begins. To mitigate these locked-in costs, making profitable crop sales becomes essential, provided they align with your cost of production. 

Understanding your cost of production is fundamental to this strategy. Compeer Financial offers a helpful tool called Margin Manager, that can assist in calculating production costs. This user-friendly spreadsheet allows farmers to customize costs according to their operations. 

Once your cost of production is clear, establishing sales and price targets becomes the next step. Positive margins that meet profit targets indicate opportune times to make sales, effectively offsetting locked-in costs. This is a margin management approach to crop marketing. 

Given the uncertainty of future weather conditions affecting yields, using your 10-year Actual Production History (APH) from crop insurance serves as a reliable starting point for yield estimates.

Crafting a written pre-harvest marketing plan can also help you to be proactive. Ed Usset’s 2024 pre-harvest marketing plan, available on his website, provides a useful reference. Starting with a clear understanding of your cost of production, and layering in sales when profit targets are met will form the basis of a solid plan.  

A well-structured marketing plan includes both price and time targets, with minimum price objectives. Hitting those price targets is fantastic, signaling a profitable crop sale. If price targets fall short but still remain above the minimum, consider making a sale to lock in a profit. 

I recommend setting time targets from March to June, a season typically marked by market highs influenced by factors like weather, yield potential and crop acres. When making sales, break them down into 10-20% increments based on total production or crop insurance guaranteed production. Going below 10% increments might mean a lot of sales to move the entire crop! 

As winter sets in, take the time to formulate a pre-harvest marketing plan. Refer to Ed Usset’s plan and consult with your Compeer financial officer as a valuable resource.