Using Simple Marketing Strategies to Sell Grain More Confidently
There’s no doubt that making the decision to sell your grain can be stressful. You start asking yourself questions like:
“Am I jumping the gun on this?”
“Should I have sold everything when my neighbors did?”
“Is there something else I could have done better?”
This indecisiveness can cause undue stress and make you lose confidence in your transactions, which can lead you to defer from your grain marketing plan. If you’re aware of all the tools at your disposal, you can feel at peace knowing that you’ve done your part to reach your goal, which is selling your grain at a profitable price.
What tools should producers have in their grain marketing tool kit?
According to Dwayne Wilson, grain merchandising specialist at White Commercial Corporation (Deerfield Ag Services’ grain brokerage), “The most essential tool a farmer can use to sell grain is a well-defined marketing plan. Starting with a simple marketing plan will ensure that all your bases are covered, so you can remain profitable in any situation.”
The easiest way to get started with your marketing plan is to work with our grain originators; they will be able to tell you if your goals and plan are reasonable. It can be difficult to exclude emotions from your decision-making process, so having a reliable, unbiased person to bounce ideas off of is invaluable.
“The biggest difference between selling your grain to Deerfield versus the end user is that the end user needs to buy your grain at the lowest price to keep their input costs down. The originators at Deerfield can act as your cheerleaders and help you along the way because they want to see you succeed,” said Wilson.
A successful marketing plan is one that addresses every area of risk. Risk occurs whenever you have a known input cost and an unknown selling price. Many of the tools in your grain marketing tool kit will be used to help identify risk. Once you have a handle on your potential for risk, you can start making proactive decisions.
“Crop insurance can offer farmers the greatest protection against risk,” said Wilson. “If you take out 70 percent revenue protection, you should feel comfortable marketing up to 70 percent of your grain in a forward contract,” Wilson said.
The worst case scenario is that you are forced to accept an unprofitable price. Utilizing crop insurance can help to mitigate any opportunities for risk in your marketing plan.
There are several digital tools available on our website that producers can use to help inform their marketing plans and identify potential areas of risk as well. This includes a slew of profit calculators and online planning programs. For example, our five-step planning tool will guide you through some simple calculations that should make up the bulk of a marketing plan. “If you work those five simple steps, you can lock-in a profitable price so you can keep playing next year,” said Wilson.
Targets are one of the most basic, yet effective, marketing tools farmers can use. A target contract is an agreement between the producer and the elevator that defines the quantity and price of grain that will be delivered to the elevator within a designated time period. Targets allow the opportunity to place a firm offer, which will make it more likely that your plan will be enacted. As soon as you have an idea of your input costs, you can use your marketing plan to determine your desired target price. Then, decide the quantity of the commodity you want to sell at your target price. When the market reaches your target price, you will be notified that it is time to deliver your grain to the elevator.
One thing that is unique to placing targets with Deerfield Ag Services is that we don’t cancel targets until you ask us to do so. Typically, if your target doesn’t hit in your predetermined time frame, the target contract would be terminated. We choose to roll those targets into the next period to give our farmers more opportunities to reach their goals. We also send out a monthly report to farmers that provides a summary of the targets they have working for them, so you can stay in control of your marketing plan.
What about the more complicated marketing tools?
We always recommend starting with the basics. If you work with our grain team to develop a solid marketing plan, you’re likely to find that the more complicated techniques are unnecessary and can produce more opportunities for risk.
“You want a simple marketing plan that focuses on knowns rather than hypotheticals or projections, as that can lead to a lot of unnecessary stress,” said Wilson. “It’s fine to look at cash prices but extensive market analysis can put you through the wringer.”
“If you have a plan and targets working, the key is keeping track of your progress.”
(A SPECIAL THANKS TO WHITE COMMERCIAL CORPORATION)