Either your hair is turning gray or falling out, or you have absolutely no involvement in grain marketing. The stress of marketing stems, not only from the volatility in the market, but the unpredictable wide range of prices for corn and soybeans. Since you are trying to market the old crop, write a marketing plan for the new crop, and you say to yourself, “There must be a better way.”

Well, yes, there is and the farm gate has the insight on how to make corn and soybean pricing decisions. Agricultural economists Darrel Good and Scott Irwin at the University of Illinois have published a new Marketing and Outlook Brief. They commiserate with you because in the past 25 years the daily spot corn price ranged from $1.22 to $5.25, and for beans the range was $3.87 to $10.40. Additionally, the unpredictability of prices has worsened, and just in the first 4 months of the current marketing year, the daily spot cash price for corn and beans in Central Illinois varied by $1.30 and $3.70, respectively. How can you create a logical marketing plan under those circumstances? It may be something other than….

The traditional approach. The use of fundamentals and technical analysis tools has long been used to forecast prices. But that process may have failed you because it has a narrow focus on timing of sales. That depends on whether you have information unavailable to the rest of the market, which you probably don’t. A second failure factor is a lack of strategies based on skills, characteristics, and beliefs of individual producers.

Good and Irwin introduce farmers to a new approach to grain marketing, based on a pricing matrix which considers more strategies than traditionally:
1) Selection of a timing window. Planting plans begin after harvest of the prior crop and extend to the storage season for that crop which ends in the late summer after the crop is harvested, and that gives a 20-24 month window. Their marketing research indicates the optimal pricing period runs from April before harvest to May after harvest.
2) Relevant pricing strategies. Instead of booking a forward contract at a given time, or any other marketing tool for that matter, the economists suggest defining your approach to pricing. This can be one of four choices that include the traditional marketing process; a pre-determined timing and volume process; and such external choices where someone else makes the pricing decisions or implementing a pricing plan outlined by a marketing advisor.
3) Allocate portions of the crop to be marketed each way. Grain marketers would decide how much of the crop would be distributed among the four methods. Such decisions are based on i) view on market efficiency; ii) risk preference, iii) financial position; iv) pricing skill, and v) decision-making discipline. These will help define the personality of the marketer, and whether the marketing can make decisions himself, or have the marketing process managed by a professional. Among the four choices previously listed various weights can be assigned to reflect the personality of the marketer.
4) Evaluate the performance. Compute a net price for each of the four choices, comparing them with each other and from year to year.

Summary:
Orderly marketing of grain can be upset by price volatility as well as the unpredictability of the market. Instead of using typical marketing tools to sell grain anywhere from 12 months before harvest to 12 months after harvest, consider changing one’s approach to marketing that will more closely related to one’s personality. Steps in doing that will include a narrower timing window, using a blend of price strategies that are composed of internal and external decision making, varying that blend to more closely reflect one’s comfort with marketing, then followed by an evaluation that compares net prices received.