Marketing grain effectively is a big piece of the farm profitability puzzle. When we had sows, we fed all of the corn that we grew. Since that ended, we have gone through a continuous learning process about how to capture the most money from all the planning and work that goes into growing the crop.

One thing about marketing – there is no shortage of people wanting to give advice about it. Taking the time to master reading the charts, and following weather, politics, and issues around the world takes a lot of time. Even understanding marketing advice can be tricky – you have to master the specialized language, and then marketing writers love to throw in lots of slang that isn’t that easy to find out what it means. I went down a rabbit hole one snowy morning trying to figure out what “nattie” refers to.  All I could find were trashy articles about feuding divas and female wrestlers.

So you always have to balance the time you devote yourself with what you are willing to pay someone else to analyze for you. Understanding how to read the charts and make good decisions based on what you’re reading is one thing… making the time to be disciplined about doing it is another – especially when the sun is shining and there are crops to plant.

We have used a variety of services over the years. I always thought it would be cool to track the advice against the reality of the bottom line and evaluate which one works best. But like most things in farming – the complexity and huge number of variables that it would take to effectively do that makes the task pretty daunting. So I do a more informal kind of evaluation – which services are easy to understand, provide the information we need to actually make decisions rather than just provide an interesting story, and which actually inspire us to get up and make a decision. 

While rarely it is true that you get along better by doing nothing and waiting for good prices, I believe in the long run, following a plan and some simple marketing advice pays. Edward Usset spoke at Farm Smart this year and he serves as a Grain Marketing Economist for the Center for Farm Financial Management at the University of Minnesota. Ed and his colleagues developed “Winning the Game” series of workshops, he teaches students about commodity markets and he also manages Commodity Challenge, an online marketing game. You can find out more information in the second edition of his book, “Grain Marketing is Simple, It’s just not Easy.” 

      Ed does not focus on hitting the high in every market. Rather, he uses a few strategies to gain a consistent advantage. “If I can find a lousy 10 or 20 cents in marketing, consistently, that’s what I need,” he says.

Ed talks about the five mistakes producers tend to make when marketing crops. The first is the reluctance to do some pre-harvest pricing. Most commodities have some seasonal tendencies that help you figure out when to make a few early sales on crops, even before they are planted. Ed follows prices and trends and has many years’ worth of data to help him see patterns and work out what strategies pay off. “Know your cost of production” isn’t new advice, but it does help when formulating a marketing plan and selling into a future market. 

Ed lists Mistake #2 as “failure to understand and track your basis”. Basis links the general futures price to the local cash price. Factors that affect the basis include transport, local supply and demand, as well as the cost and availability of grain storage. Basis tends to also have seasonal patterns, which can be seen when comparing data year over year.

Mistake #3 is “lack of an exit strategy”, which I think can be a mistake in many other areas of life – not just marketing grain. For those of us with on-farm grain storage, corn sitting in our own bins doesn’t trigger the same urge to sell as getting the storage charge bills for grain we are holding in some other location. Ed recommends setting a target to sell all of the crop by a certain date, depending on seasonal trends, to prevent holding it too long and being forced to sell at lower prices. 

Mistake #4 is “holding grain in storage too long”, and is obviously related to mistake #3. This is easy to do when prices aren’t great and we like to convince ourselves that better prices are just around the corner. Ed points out people who make this mistake often break the 11th commandment of selling grain, which is “Thou shalt not hold unpriced corn in the bin past July 1.” Growers can end up in a situation where they are selling at harvest prices because they need the bins for the new crop coming in off the field. 

Mistake #5 is thinking you avoid storage costs when you sell grain and buy a call. This gets into complicated territory. I have used puts and calls in the past, but only sparingly and when the markets were more volatile than what we’ve seen the recent past. 

        Ed’s research has shown that using an option strategy to sell grain and then holding a call option to its expiration pays three out of 27 years in corn, 13 out of 27 years in soybeans, and seven out of 27 years in hard red spring wheat.

         At the end of the day, knowing your cost of production, paying attention to seasonal highs and lows, and picking the marketing advice that you can understand and will actually read may be the way to get started if marketing is one of those tasks you dread. If you really dread it – it may be one of those farm tasks that is better done by someone else, leaving you with more time to focus on tasks that you are good at. ◊