Grain marketing: why is 'pulling the trigger' so tough?
By Bill Craig,
U of M Extension Service
Knowing when to "pull the trigger" is important whether you're marketing grain or hunting trophy deer. More grain producers are now developing written grain marketing plans, but when asked if they follow their plans, many say "no."
Why not? The majority will say, "When I wrote the plan I felt I would be satisfied if I could receive the price target in the plan." As the market gets near the price target, uneasiness comes over many producers. They may be looking at higher production costs and feel a higher price is justified. They begin to think if they sell at the price target set, they could give up some profit potential.
This fear of leaving some profit on the table keeps them from pulling the trigger and following their plan, often resulting in missed opportunity and lost profits. Examples of this flawed philosophy happened this summer and fall.
For instance, in the spring wheat market in October, the December '05 futures on the Minneapolis Grain Exchange traded at over $3.90 per bushel. December '05 corn futures on the Chicago Board of Trade (CBOT) traded at over $2.50 per bushel in July. The December '05 soybean futures contract on the CBOT traded at over $7.60 per bushel in June.
How many producers sold grain near those prices? Like the trophy buck, those top prices are only in sight for a short time and then gone.
Increasing the number of sales in the marketing plan, or adding more deer tags, can improve the odds of reaching the high market price or tagging that trophy deer. Another way of improving the odds of better marketing is to join a commodity marketing club.
The results of a 2003 Texas A&M survey of commodity marketing clubs conducted by University of Minnesota Extension educators show that Minnesota producers enrolled in structured marketing clubs achieved impressive improvement in net farm income. Of the 62 Minnesota marketing clubs surveyed, 156 producers who reported a price impact on any commodity averaged $20,401 per operation as a result of marketing club participation.
Contact me at craig030@umn.edu to find out where marketing clubs meet in your area. Winning The Game (WTG) programs are also being scheduled throughout the state to help producers with pre and post harvest marketing options. For more information on WTG programs, contact the University of Minnesota Center for Farm Financial Management at www.cffm.umn.edu.
Waiting for more bucks (either higher prices or trophy deer) may not be an option for some producers. So a piece of good marketing advice is: as long as the price target is at a profitable level, pull the trigger.
Follow your plan--make incremental sales as the price improves. You may not receive the highest price or tag that trophy buck, but at the very least you should be around next year for another hunt.
(Bill Craig is an agricultural business management educator with the University of Minnesota Extension Service Regional Center, Crookston)
