Business side: Marketing tips
CONVERSATIONS WITH BUSINESS EXPERTS
WHAT ELEMENTS SHOULD BE INCLUDED IN MY GRAIN MARKETING PLAN?
Developing a marketing plan will help you manage risk and keep you focused on maintaining profits. There are several factors you need to think about to create a plan that is right for you. What is your cost of production? You need to know your break-even price so that you can plan a strategy to sell above this level. You should also develop a timeline for selling your grain so that you can maintain cash flow within your operation. This brings into question what storage capacity you have available to you and how much it will cost to store and maintain the quality of the grain. Storage also provides the flexibility of timing your sales and hopefully getting higher prices than shipping grain at harvest when supply of grain is plentiful. Grain quality is another aspect to consider with a grain marketing plan. Will you be meeting protein levels to take advantage of premiums? You should also understand your delivery options with respect to delivery date, delivery locations and cost of transportation (will the buyer cover the cost or are you responsible?).
HOW OFTEN SHOULD I REVIEW MY MARKETING STRATEGY?
You should review your marketing strategy at least a couple of times per year to make sure you are meeting your financial goals and taking advantage of market fluctuations. I like to watch the monthly USDA reports to get an idea if there have been any fundamental changes in the marketplace that could affect prices.
WHAT IS THE BEST WAY TO MITIGATE THE RISK ASSOCIATED WITH VOLATILE COMMODITY MARKETS?
The best way to mitigate risk is through a diversification of production. Gains in one commodity can help to offset losses in another. You can also take advantage of resting orders to set price targets so you do not have to constantly watch the market prior to calling in to price. With the Wheat Marketing program at Grain Farmers of Ontario, producers can select a price that they would like to contract wheat at. Our team monitors the markets and if it reaches the desired price we will write a contract for that producer.
WHAT OTHER MARKETING OPTIONS ARE AVAILABLE THROUGH GRAIN FARMERS OF ONTARIO?
Grain Farmers of Ontario’s Wheat Marketing department offers forward contracting so producers can lock in a price for wheat at any time during the year, to be delivered during a future delivery period. We also offer cash pricing which allows wheat producers to deliver their wheat at any time between October 1 and May 31 to any board appointed agent, terminal or processor and receive the closing price on the day the wheat gets reported to the board office.
We have also had a lot of success with our Pool program. Grain Farmers of Ontario can market grain on behalf of the producer. An initial price is paid at delivery and then an interim payment is made in January before a final price is determined the following August. To help determine if the Pool is a good option for you, we have developed the Pool Return Outlook (PRO). The PRO is a price indication based on current nearby and forward markets. It is not a guarantee of price but rather an indication, or projection, of potential returns based on current price and economic conditions. The PRO is updated as market conditions dictate.
WHAT SOURCES DO YOU RECOMMEND TO FARMERS TO STAY UP TO DATE ON MARKETING NEWS AND THE LATEST PRICING INFORMATION?
Grain Farmers of Ontario provides current pricing information and news on our website www.gfo.ca, and market prices can also be accessed from your mobile device with our SellSmart app. The Marketing department is also happy to speak with you about any questions you may have.
To gain a better understanding of market trends, I recommend taking a look at the monthly USDA report, subscribing to a paid service such as DePutter or Donne Advisory services to name but a few, and if you use a broker it is a good idea to read their daily reports. I find it is also helpful if you talk to your local elevators for insights on how the markets are trending.
Another important resource is other producers. Sometimes just talking with people who understand the business can help you make informed decisions. •
