How to Protect Against Market Volatility with a Strategic Marketing Plan

April 30, 2020 • Jamee K.

How to Protect Against Market Volatility with a Strategic Marketing Plan

By now, most farmers have wrapped up their budget forecasts for the 2020 season, established their final cash rent agreements, and firmed up any last-minute seed needs. Before the business of planting season begins, take time to examine your initial forecast and build a marketing strategy to execute against that plan. Below are some suggestions you can include to help maximize profitability and alleviate stress.

Manage What You Know

It’s difficult to plan and manage for the unknowns that occur during the growing season. COVID-19 is a perfect example of this. Pat Kroese, director of business development at GrainBridge, notes that what farmers can control is the planning they put into their business ahead of time so that when unforeseen circumstances arise, they’re prepared.

One way to do this is by managing core input costs. Have early conversations with retailers to determine the best time to buy fertilizer and chemicals. Perform routine maintenance checks on equipment to alleviate major repairs or purchasing of new equipment. And be sure to examine family living expenses to make sure your spending is realistic.

Make Some Offers

Once you’ve determined a profit target, Kroese recommends incorporating step-up sell offers with your local elevator or brokerage firm. Allocate 5-10% increments of your marketable bushels every 25 to 30 cents, up to an amount you’re comfortable with, then allow the offers to work through the spring and summer rallies and build on a solid average price. This is a great strategy to allow the market to work for you while you’re busy in the fields.

Monitor the Markets

Once the growing season is underway, it’s important to continue monitoring the markets and making adjustments as needed.

Kroese suggests paying particular attention to reports such as the NASS Prospective Plantings report, which is published once a year at the end of March, and the NASS Acreage report, which will be published June 30, 2020. “To stay on top of your marketing, you really should be monitoring these key reports, as well as US and global markets, and have a good weather forecaster you follow and trust,” Kroese says. “If you’re not, you should have an advisor who’s monitoring these things for you, as they’re all factors in market movement.”

Kroese says grain marketing is like a chess game; decisions should be based on planning and strategy, not emotion.

“Having a plan in place really helps to take some emotion out of grain marketing, and helps you to execute. Even though farmers are inevitably going to make changes and plans need to remain flexible, they have a better opportunity to capture some margin when they have a plan in place.”

Whether it's a farm management platform or trusty spreadsheet, take time to plan ahead; once you get busy in the fields it can be difficult to grasp your cost of production and profit potential from the tractor cab.

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GrainBridge has been providing a risk management platform to farmers for more than a decade and has helped thousands of farmers better organize and manage risk on their operations.

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