Don’t have time to read? Listen here:
If a grain marketing opportunity comes your way, you have to be able to pull the trigger.
That’s the theme of this month’s blog posts: how to build a grain marketing plan that works.
This week is logistics, or in other words, figuring out when you can haul grain and what can you store.
This is the personal part of a grain marketing plan. The problem of logistics is why you can’t just download a spreadsheet off the Internet and make a successful grain marketing plan. There are a lot of individual things that each farm has to deal with.
In particular, consider these four logistics obstacles.
1) Bin Space
Some farms can store 100% of their harvest, which means they have massive flexibility in their grain marketing. When opportunities in the markets present themselves, farmers must contract for the correct months depending on whether they are selling off the combine or out of the bin.
Most farmers can’t store their whole crop. This is not a problem, it just means that their grain marketing plan will look a bit different and they won’t be sitting on all that grain.
Remember, the reason for grain bins is not to make up for sloppy marketing, it’s to capture basis movements. Those bins can end up costing money too…
2) Load Limits
In the spring in my area, we have a lot of roads that limit how much grain you can haul, because the ground becomes soft from all the moisture.
You don’t want to set yourself up for a lot of hauling during times when you can’t haul a full load. Then you’re just wasting fuel and time. After all, sometimes a round-trip haul to the elevator is 40 miles or more.
3) Winter Weather Hazard
I’m in South Dakota, so we get really brutal weather at times. In the winter months, if I want to keep my guys busy hauling grain, I have to have a reasonable amount of grain contracted.
Otherwise, we might get a blizzard that takes us out of hauling grain for a week or two. And I don’t want the guys driving down icy roads with 120,000 lbs of grain. When that truck gets going, it’s hard to stop, and the last thing I want is for them to drive it into a ditch in the middle of a snowy, icy winter.
Make sure that when you’re scheduling grain to be contracted in your marketing plan, you’ve got a plan that accounts for weather.
It needs to be convenient for you to haul the grain to town. You don’t want to schedule grain when you’re planting or spraying.
Remember, too, that when you’re storing grain, you can get better prices by holding it. So you need to look at the carry in the market.
Logistics and the carry have a lot to do with each other. Elevators will pay you to sit on that grain until they need it by lowering the basis. You need to be paying attention to basis or they will raise it quickly when they get enough contracts from your neighbors to fill their trains or barges.
So understand the logistics of your farm. Knowing when the best times are to sell and deliver grain is really important in your marketing plan.
A grain marketing plan isn’t just about simple numbers. It’s also about timing and seasonality. Make sure your plan accounts for these logistical obstacles, and you’ll be in a position to maximize your revenue.
We’ll be getting into some complex topics in the next few weeks, but it’s good stuff, so stay tuned!