One of the mistakes is keeping grain for a long time in warehouses, waiting for prices to rise – “Do you have an exit plan if something goes wrong?”
Whether you’re in the middle of harvesting or have already completed it, there are five common mistakes farmers often make when marketing grain.
“One of them isn’t really relevant right now, but it’s this reluctance toward in-harvest pricing, or pre-harvest pricing,” says Ed Usset, a grain marketing specialist for the Center for Farm Financial Management at the University of Minnesota.
“A lot of producers took advantage of that last summer during the big rallies to do something. And they’re in a good position.”
Usset says another mistake he teaches his students at the University of Minnesota is not paying attention to the base.
“I’m talking about base and transfer and not understanding base,” Usset says. “Producers have to look around and at the base, and that can add a cent or 10 cents to the marketing game.”
Usset says the third mistake he likes to point out is one that is extremely important today.
“A lot of producers are putting corn and soybeans in storage and waiting for higher prices, and I ask farmers: Do you have an exit plan? What prices do you expect? What timing do you expect?” says. “And of course many of them don’t know – they just expect a higher price.”
Another mistake Usset says is one he often sees in the northern part of the US, is keeping grain in storage too long.
“We have producers, especially in Minnesota and the Dakotas, who can hold grain for a long time,” he says, “and I like to mention the 11th commandment of grain marketing: You must not keep grain after July 1st in the bin . And a lot of people violate that every year, and we could analyze the reasons why they do that.”
The last mistake he sees is a little more mysterious to producers: transfer to market.
“It’s the price differentials between different futures contracts and I will note that over the last four or five months the market has collapsed. It’s not just the lower prices, but we’ve gone from inverse markets in grains to significant carries and it’s the first time that we’ve been seeing market carry for three years.”
