Grain Marketing 101: Why Selling Grain is More Profitable When You Get a Second Opinion

Posted on July 17, 2021

Producers, think of your grain bin as the stock market. Odd thought, we know. But from a profit standpoint, just like the market, there are various streams of revenue you can access. Plus, timing is a huge part of determining when and how you profit. It’s important to stay on top of things so you can maximize your financial yield. This article will not only help you determine how to profit with the grain marketing information you receive, but where to get that information from.

Decisions, decisions…

In 2020, Canola ranged from $9.00 to nearly $14.00 a bushel. Did you make the most of changing prices to get the best deal possible? Questions to ask yourself include:

  • When did you sell?
  • Did you get the best price for your long-term goals?
  • Or are you still waiting to sell?

Some producers make these decisions without considering a second opinion. Would the same approach be taken for the financial markets without consulting a financial advisor? Probably not.

There are many reasons to get a second opinion on your grain marketing, but today we’re going to focus on three key areas:

  1.  Why you should use an unbiased advisor when developing your grain marketing strategy.
  2. Why you should have access to accurate, current, and relevant grain market information in your area.
  3. Why complex contracts should have a trusted advisor involved.

Grain marketing advice, hold the bias

Grain trading is an inevitable part of farming, but not all producers are experts at it. Their expertise typically lies within the actual farming, whereas at FarmLink, our advisors are experts at grain marketing.

Sure, working with your local elevator to sell grain is simple and efficient, but sometimes it comes with a bias. Your local elevator might not have your best interest in mind when buying your grain. Have you ever questioned if it’s reliable to get advice from the merchant buying your stock? Wouldn’t it be smarter to enlist a third-party? That’s where we come in.

FarmLink provides an unbiased second opinion so you don’t have to worry about being ill-advised by an elevator. Plus, FarmLink also helps you develop your grain marketing strategy.

Our expert advisors base their advice on data and the current market, so you always know you’re taking the right actions to achieve your goals

Cashflow and long-term plans determine where a producer’s return on investment (ROI) sits. What works for one producer might not work for the next. To successfully market your grain, it’s crucial to have a strategy. That’s why we work with you to create a long-term plan specific to your needs and goals.

Producers went into the business to farm, not trade. Understandably, they tend to focus on the production side of their farm versus the marketing side. However, planning and executing a grain marketing strategy is what puts a producer in control of their financial yield.

Without the science behind growing a crop, your farm wouldn’t exist, but without navigating domestic and global market prices, you might not meet your financial goals. Using an advisor can help mitigate risk and manage outcomes.

The benefits of information meant specifically for you

There’s a lot to consider when it comes to grain marketing. Some common things include:

  • Analyzing what you need for a price or yield to break even
  • The costs for each crop
  • How and where to gather unbiased grain market information
  • The time of day when you research
  • Your marketing plan

Producers tend to be quite busy managing their farms. Due to their hectic schedules, it’s easy to miss out on the ever-changing grain prices.

Getting a second opinion can help show producers things they may have overlooked and help them yield a higher profit.

Most producers base their expected yield on their average production history (APH). This benchmark is a helpful starting point for grain marketing because it’s based on data, but remember — it’s only a starting point.

To allow for updates throughout the season, it’s better to start with an “on-trend” yield amount based on a normal crop year, and then consider production risks. Solely using an APH often leads to producing more grain than in your marketing plan.

So, what’s the problem with extra grain? Extra production is great, but if you didn’t plan for it then that extra grain will be sold at market price, whether that price is high or low.

Creating a grain marketing strategy with a FarmLink advisor helps producers sell smarter and understand the profitability of their business over the growing season.

Why complex contracts should have a trusted advisor involved

Contracts are a great tool for producers looking to reduce price risks and develop a marketing plan fit for their farm. Grain companies offer various contract options, but the terms and conditions differ substantially across companies.

These contracts are often written in legal jargon, which can be hard to understand for those who aren’t familiar with this style of writing.

In a 2013 producer survey, the University of Manitoba found that only 17% of respondents said they read the entirety of their contract terms.

A contract legally enforces the deal between a producer and buyer, so it’s crucial to understand everything before signing. If you don’t deliver on your end of the deal, you may be subject to court enforcement. Contract terms are also subject to change without notice, so it’s important to review your contract often.

Due to the complexity of certain contracts, it’s a good idea to seek third-party advice from a trusted advisor like FarmLink.

The bottom line

To get the best deal and achieve your long-term financial goals, it’s important to get a second opinion.

As a producer, there’s so much to keep track of on a daily basis, and keeping up with current grain market information can feel out of reach at times. With help from FarmLink’s unbiased advisors, you can gain more control of your financial yield and set a grain marketing plan that works for your long-term goals. We’re here to give you a fair second opinion so you can make the most of your harvest. Contact us here to learn more about how we can help build the right grain marketing plan for you.

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