Connecting Vision with Timely Strategy
By Lacey Seibert, Vice President of Grain
Our vision at ALCIVIA is customer success powered by engaged employees. This can be seen in our grain division’s focus on the talent and technology needed to bring solutions to our members that will allow them to execute intelligent and timely grain marketing plans.
The timeliness of grain marketing is one of the major contributors to a successful bottom line for grain producers. Increased volatility in the grain market can make it more difficult for producers to “pull the trigger” on grain sales. This is especially true when our trigger pull moment is based on a feeling or trying to catch the high in the market. This out-of-control decision making is not the only way. There is an alternative approach that leaves grain producers feeling more in the driver’s seat when they are making grain marketing decisions. The idea is to be prepared, which will lead to calm decision making no matter what the market does. This involves proactively understanding resources, needs, and obstacles. When we have a strong understanding of these, we are in a much better position to execute on opportunities with confidence and reduce risk.
Applying this to grain marketing of bushels in the bin, producers should have an active understanding of the following grain marketing factors:
Cost per bushel per month to store the grain on farm
The key is to be realistic: be sure to factor in often overlooked interest cost per bushel and quality risk. Understanding cost of storage allows us to make informed decisions about how long we should hold grain waiting to sell.
Understand the futures price today versus the price for a period in the future. This is important because it tells us if the market wants us to bring the grain to town now or store it and bring it later. The greater the positive difference (carry) the greater the incentive the market is paying to store bushels until later. If the difference is negative (inverse) the market is paying more now for bushels than in the future or calling for the bushels to be delivered right now. The spread tells us if the market is paying us to store or deliver.
Per bushel breakeven
When looking at cost of production, be sure to factor in labor and equipment costs. Understanding this will allow us to know the bottom of the pricing range we should be targeting and will allow us to know our profit margin per bushel on all sales.
Cash flow needs
Knowing when we will need to make loan payments, pay bills, and have cash obligations will allow us to proactively sell grain to ensure we have the needed cash on hand. We never want to be forced into sales because a bill is due, we want to make sales because they hit targets and are a part of the grain marketing plan.
Hauling grain to the elevator can become a challenge during certain seasons when labor is being used in different areas on the farm. For this reason, it is important to be proactive and make sales to be delivered during times of shipment that we have available resources to deliver.
Freight costs per bushel
Knowing the freight cost to deliver from our bins to sales destinations will allow us to accurately evaluate if a price we are seeing meets our targeted goals. We are looking at an incomplete picture if we are not calculating freight costs out of our margin. Be sure to factor in labor and depreciation.
It can feel like a huge undertaking to actively understand all these grain marketing factors. ALCIVIA’s grain marketing specialist team is equipped to help you dig in and create a personalized grain marketing plan that will account for all the grain marketing factors. Give us a call today to get in the driver’s seat with your grain marketing!