Don’t sell with the crowd
The two main enemies of good marketing are greed and panic. Avoid these and there is a good chance you’ll have more money in the bank when the crop year closes.
That is the recommendation of three marketing advisers from Alberta Agriculture who ran a three-day marketing simulation course in Calgary recently.
They said too many farmers sell their grain for reasons other than good prices. Sometimes it gets sold to meet immediate needs like paying bills or because harvest is coming and bin space is needed.
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Follow the leader
Sometimes there is panic selling in a dropping market and sometimes farmers sell because they noticed the neighbor was moving grain.
Habit and tradition are also factors. As a result, two-thirds of all grain is sold into the bottom third of market prices.
Course instructors emphasized that if farmers develop a written marketing plan, they can probably sell their grain in the top third of the market. They suggested the plan be written down, making it harder to ignore and more difficult to fall back into emotional selling.
One instructor suggested marketing could be a profitable full-time job for the half of the farming couple not involved in production.
There should be several goals to a marketing plan. Most importantly, it must include the farm’s cost of production for each commodity each year. Without that data, you are marketing in the dark.
The instructors suggested the information be used to set three price targets: A survival level; a level that provides for sustainable farming; and a third set 15-20 percent above sustainability. They dubbed the last a “jump at it, stupid” price.
Also included should be a cash flow schedule reflecting living costs and bill payments.
Just as you should know cost of production, you should also know quantity and quality of the grain produced. The plan should be updated regularly with production information that will influence final yield.
At harvest, as bins are filled, samples should be taken and sent to the Canadian Grain Commission for grading. The CGC’s grade is not binding, but it is a guide to help determine whether the elevator grade is fair.
While all this information is being compiled, producers should also be watching market trends. Many farmers who commit to a marketing plan soon find themselves swamped at this stage. There are dozens of market newsletters and sources of price information, too much for most people to follow.
The instructors suggested farmers leave analysis up to professionals, picking three with good track records.
They also suggest drawing up a list of about 20 people to call for opinions on markets. They can be fellow farmers, elevator agents, feedlot owners or grain brokers. Phone three or four a week to keep abreast of the news. Remember, you might be able to give them as much information as they give you.
Take a calm attitude to marketing. Markets swing each day on bits of news that often get blown out of proportion.
Stick to your plan
Finally, sell crop when the targets established by your market plan are reached. There is a natural greed in most people that causes them to hang on too long, hoping to hit peak prices and then sell in frustration as prices fall.
Remember, if you catch the top third of the market, you’re probably doing much better than your neighbor who doesn’t have a plan.
