DO YOUR HOMEWORK

You know your situation better than anyone. So this part is really up to you. Effective grain marketing begins before a bushel is sold – as you sit at your kitchen table with pencil in hand or at your desk with your computer awaiting input.

This is more than navel gazing, and even if you think you’ve got it all “up here” (in the old noggin) we can’t emphasize enough how glad you’ll be that you got it all calculated and recorded. In other words, doing these four critical homework assignments will pay off later when emotions run high.

  • Know your cost of production

    This is the only way to know your true break-even levels. Record it all as accurately as possible and remember to include costs that are often overlooked, like equipment payments

    This is the only way to know your true break-even levels. Record it all as accurately as possible and remember to include costs that are often overlooked, like equipment payments, taxes and even your time.

    Understanding your true costs will help you recognize profitable sales opportunities. Use those cost-of-production numbers to determine price targets. But be realistic. While it’s not always possible to achieve the profit you want, it’s key to know the minimum you need to achieve without losing money.

    Based on the pricing levels you want to achieve and the commodities you're selling, you will have a number of ways to market your grain to reach those targets, including the cash market, options, and hedging in the futures market. Price and basis levels, commodity market outlooks, and other indicators will help determine which is right for each situation.

  • Assess your risk tolerance

    No two grain marketers will have the same appetite for risk. For you, it comes down to assessing your capacity to stomach swings in the market (volatility) as well as the tools you are comfortable

    No two grain marketers will have the same appetite for risk. For you, it comes down to assessing your capacity to stomach swings in the market (volatility) as well as the tools you are comfortable using as part of your grain marketing plan.

    There are different tools available with varying levels of complexity and risk, and you should have a firm understanding of how a particular tool or strategy works before taking a position.

  • Set up (and stick to) a delivery schedule that fits your operation

    Too often grain deliveries are either delayed in hopes of a rally or become necessary due to the need for cash flow at a particular time. But you don’t need to be a slave to the timing of those financial

    Too often grain deliveries are either delayed in hopes of a rally or become necessary due to the need for cash flow at a particular time. But you don’t need to be a slave to the timing of those financial obligations.

    You can separate grain pricing from delivery by forward pricing a set number of tonnes before harvest when there’s a glut of grain flowing into elevators around your neighbourhood.

    Because grain marketing is cyclical, you can also use historical information to show when basis levels are typically low. Think about basis as a separate pricing decision.

    Pro Tip: Set aside a number of tonnes to carry into the summer unpriced to sell during a potential weather rally.

  • Record the long-term goals for your farm

    Goal planning should look beyond one year at a time. Develop a three- to five-year plan to help you lay a foundation for long-term success

    Goal planning should look beyond one year at a time. Develop a three- to five-year plan to help you lay a foundation for long-term success.

    If you are working toward a specific goal – say expansion or succession – this may affect your risk tolerance as well. Consider consulting a professional advisor who follows the markets and provides advice for a living.

Make the Grain Marketing Academy part of your plan

You’ve got to do your homework to build a successful grain marketing plan, but we’re happy to lend you our notes. Enroll in the Grain Marketing Academy to get six personalized lessons delivered to your inbox.

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STUDY THE MARKETS

So, you’ve got your own situation nailed down and you’ve set some objectives. But that’s only half the story. Now you need to take stock of what’s going on outside of your home quarter – and around the world.

The grain market is a moving target. Commodity prices can change rapidly, and the factors moving the market this week may become irrelevant next week. There are plenty of sources of information out there, but with a little tutoring, you can cut through the noise to keep track of what’s most important.

  • Stay in touch with what’s happening in the markets

    The United States Department of Agriculture (USDA) and Statistics Canada release reports on planting progress and acreage, on-farm stocks and carryout on every commodity produced in

    The United States Department of Agriculture (USDA) and Statistics Canada release reports on planting progress and acreage, on-farm stocks and carryout on every commodity produced in North America throughout the year. Who has the time or inclination to track the dates of each report or to decide which ones matter most?

    Save yourself the hassle by posting them near your desk or saving them directly to the calendar on your smartphone. The Marketing Academy has made it easy.

  • Learn the lingo

    Grain merchants and other marketing experts use a language all their own. If you’ve been farming very long, you’re probably somewhat familiar with this jargon, but a little refresher can help you

    Grain merchants and other marketing experts use a language all their own. If you’ve been farming very long, you’re probably somewhat familiar with this jargon, but a little refresher can help you translate on the fly. Effective grain marketing begins with speaking the same language. Keep the Marketing Academy Glossary nearby for when the vocabulary has you stumped.

  • Be a student of the world

    Commodity prices rely on global supply and demand. Therefore, day-to-day grain marketing decisions depend on collecting and analyzing information about weather, commodity production, politics and

    Commodity prices rely on global supply and demand. Therefore, day-to-day grain marketing decisions depend on collecting and analyzing information about weather, commodity production, politics and the appetite for particular products around the world.

    The simplified explanation is that markets rise because buyers are purchasing commodities at higher prices whereas markets fall because sellers are making sales at lower prices. But in reality, it’s far more complicated than that.

    Knowing that you have to look beyond Western Canada to understand the interplay between the countries of the world, who are the big players in each commodity, and which political decisions will move a market will give you greater insight into how to time your sales.

Correlation is the term used to describe how two commodities or markets move in relation to each other. They can be positively correlated (move up or down together) or negatively correlated (move in opposite directions). Here are some common correlations that might impact your farm:

  • Soybean Oil vs. Canola = Positive
  • US Dollar vs. Canadian Dollar = Negative
  • Corn vs. Chicago Wheat = Positive
  • US Dollar vs. Grain Futures = Negative
  • Chicago/Kansas City/Minneapolis Wheat = Positive

Get your cheat sheets from the Grain Marketing Academy

Cheat sheets are a great start, but if you don’t have time to translate every report or study the markets, enroll in the Grain Marketing Academy to get six personalized lessons delivered to your inbox.

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DEVELOP GOOD HABITS

Are you an adrenaline junkie – the kind who gets a rush from skydiving out of a plane? Or would you prefer a less-stressful experience? Grain marketing can certainly feel like you’re hurtling towards the earth and your parachute won’t release – but creating a strong, clear plan will get your feet on solid ground.

The grain market is a moving target. Commodity prices can change rapidly, and the factors moving the market this week may become irrelevant next week. There are plenty of sources of information out there, but with a little tutoring, you can cut through the noise to keep track of what’s most important.

Using the information you recorded when you did your homework, include your pricing targets, risk tolerance, cash flow, ideal delivery schedule, and long-term goals in your grain marketing plan.

The bigger challenge lies ahead. Executing the plan and staying on track amid a world of uncertainty is the hardest part of grain marketing. You see market volatility increase and it can be paralyzing. You end up watching a rally go all the way up and all the way back down without ever capturing the prices you wrote down as being profitable.

Leave the thrills for the adrenaline junkies! The most disciplined grain marketers are often the most successful.

Here are some Marketing Academy tips for maintaining discipline:

  • Remain flexible

    The grain marketing plan you started last season is not the same now. Rather than abandoning the plan, review and adjust it to reflect demand or weather changes and take advantage of market realities. Be flexible without giving up on those goals you set for yourself, and be willing to stick to a decision and see a transaction through.

  • Avoid being greedy

    Steer clear of the trap of wanting to capture every cent. Your plan should be designed to capture profit. If you abandon the plan and begin stalking the markets, you may get to the point where you don’t sell at all. You may have to accept a lower-than desirable price in order to clear those final tonnes out of your bins before harvest.

  • Think differently

    Use percentages instead of bushels. Psychologically, percentages often sound like less of your overall crop than actual tonnes do. As the year progresses, base your sales on the percentages outlined in your plan.

  • Work with a partner

    A professional advisor is not emotionally invested in your grain, but they will be invested in your success. They also work with grain markets on a daily basis and can provide that second opinion to help you keep your emotions in check.

Break your bad habits in the Grain Marketing Academy

It takes 30 days to form a habit, but the benefits to your bottom line will last a lifetime. Enroll in the Grain Marketing Academy to get six personalized lessons delivered to your inbox.

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GO TO THE TOP OF THE CLASS

You already know there’s a lot more to a grain sale than showing up with a truckload of grain and receiving a cheque. But are you making the most of each transaction?

Using the grain contracting tools available, you have the power to take your grain marketing from middle-of-the road to best-in-class.

But sifting through the types of grain contracts and the myriad choices in the marketplace sometimes feels overwhelming.

You’ve probably noticed that grain buyers offer alternatives that can help you do anything from setting a price floor, to reaching for a really attractive price, to re-pricing or putting a portion of your grain trading in someone else’s hands.

Pretty much everyone has felt the sting of missing a big selling opportunity. It often happens when you’re busy seeding or away on holidays, or you’re too nervous to act because of production risk. You can avoid FOMO (fear of missing out) by setting up a contract that will automatically capture price rallies.

When you’re inclined to try a more sophisticated grain contract, don’t limit yourself to only the most basic deferred delivery or fixed basis contracts.

But you shouldn’t be forced into trying something you aren’t ready for either. Do your research and consult an expert. Take a good, hard look at what contract is right for you and which one will help you reach the price targets you set when you began the grain marketing planning process.

Graduate to the Grain Marketing Academy

Stop being a student and become a master grain marketer. Take our entry quiz to enroll in the Grain Marketing Academy and get six personalized lessons delivered to your inbox.

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CONCLUSION: THE EXAM

Just kidding!
We said there would be no exam, and we meant it. BUT the real test is in the results you see when you use your newly-honed grain marketing skills.

Not every piece of advice will work for everyone, but putting these grain marketing fundamentals to work for your farm will help you find sustainable success and build your confidence as a grain marketer.

We believe you will have a whole new outlook on the world of grain marketing.