|
| | ||
| ||||
| ||||
| ||||
| HOME | ABOUT US | CONTACT US | SUBSCRIBE | NEWSSTAND LOCATIONS | ||||
| ||||
|
|
| | |
Farm bill comes up often at grain marketing meeting Tuesday, January 29, 2008
Agri News staff writer
NORTH MANKATO, Minn. -- The farm bill came up often during last week's grain marketing seminar in North Mankato.
Kent Thiesse, Vice President of MinnStar Bank and a Government Farm Program Analyst, focused on the 2008 farm bill during the seminar.
"It has been said that this farm bill effects all Americans, and there is some truth to that statement," said KentThiesse, vice president of MinnStar Bank in Lake Crystal. "The reason it will effect many Americans is because the fundings go to programs far past the regular commodity programs such as school luch programs and nutrition programs to name a few."
Thiesse said two factors will have the biggest impact on the legislation. One is the federal budget deficit.
Thiesse said Congress will finalize a new farm bill in the next two months. One thing that will potentially be new in the farm bill will be an addition of an engery title.
Edward Usset, a University of Minnesota grain marketing specialist, focused on grain marketing strategies.
"I have a different approach to marketing. I want to be able to have an edge and find a dime, and in order to do that I need to have a plan for before and after harvesting and eliminate my mistakes or at least minimize them," said Usset.
Usset said that the average farm earns 20-30 cents per bushel including government payments.
"If farmers recieve 10 cents more per bushel that could increase the net income by 33 percent to 50 percent," said Usset. "If 10 cents isn't ambitious enough try to find three or four more dimes."
Usset said farmers need a proactive strategy to price the grain that considers their financial goals, cash flow needs, price objectives, storage capacity, crop insurance coverage, anticipated production, and appetite for risk. Farmers shouldn't be reactive and sell a lot of their crop because they need space right before harvest, nor should they be overactive and sell their crop and buy it back over and over.
"It is a hard game to play well and consistent when farmers are looking for that high price," said Usset. "That is why great marketing is not finding the high price. It's finding an extra 10-20 cents per bushel with a solid plan that avoids mistakes."
Usset used six "celebrity producers" to illustrate his point for pre-harvest marketing advantages. His first farmer "Barney" prices his grain at harvest selling the crop because he needed the space. His second farmer "Grandma" had timing-driven sales with sales made in 10 percent increments over seven months (January-July) with no minimum price.
The third farmer "Justin" made sales in three 25 percent increments based on prices, and if the price wasn't at break even or higher he wouldn't sell. The fourth farmer "Terry" sold the crop in 25 percent increments during March through May, and had a minimum price that had to be above the cost of production. The fifth farmer "Peter" did things similar to Terry, but he re-owns each sale with call options. The final farmer "Darla" combines price objectives and decision dates and uses whatever comes first.
"When we look at the pre-harvest advantage in corn between these six celebrities, every one beat the first farmer Barney because they all found a dime," said Usset. "The same shows for soybeans as well."
Peter the farmer who re-owned his crops had a harder time finding more dimes than the four other farmers above him, and that seems to be due to re-owning the crop over and over because again it is hard to find that high price, according to Usset.
So, what can farmers conclude from the celebrity producer illustration for a pre-harvest advantage?
"As we can see everyone with a plan found a dime and everyone with a plan beat the harvest price," said Usset. "The key message here is to have a plan."
When looking at the coming year for a pre-harvest marketing plan, Usset says the objective is to buy crop insurance to protect the production risk and have 75 percent of the anticipated corn crop priced by early June. He recommended ignoring decision dates and no to make sales if prices are lower than $2.60 per bushel local cash price or $3 December futures, and exit all options positions by mid-September 2008.
Farmers shouldn't make sales if the prices are lower than $6 per bushel local cash/$6.75 December futures.
"Overall, grain marketing is simple, but it is not easy," said Usset. "With the ethanol boom coming up, we are in need of a marketing plan more than ever for our crops. Farmers need to realize that nothing is 100 percent, but they should find try to find a dime, and in order to do that they need to have a plan and minimize their mistakes." |
| | |
| |
Copyright 2008 Agri News
All Rights Reserved
