Get Cash While Preserving Upside
Many farming operations need cash in the fall and spring. According to ADM Grain Origination Specialist Glenn Menke, the trick is paying bills without surrendering market upside on the grain you deliver.
“During harvest, you’ve got high fuel costs, fall-applied fertilizer and anhydrous, final fall rent payments, and maybe some real estate taxes,” says Menke. “In March, growers are looking at income tax, cash rent, and spring-applied fertilizer.”
With ADM, you can free up cash when you deliver while maintaining some upside.
“Know your breakeven, and if you can beat it, lock in some sales to cover fall and spring costs.”
‑ Glenn Menke, ADM Grain Origination Specialist
Here are three contracts that offer this arrangement:
Minimum Price: This contract gives you a hands-on approach with downside protection. You decide your price parameters and protect yourself with a floor.
Price Point: This contract also establishes a floor price, but lets you take advantage of upside market volatility. Unlike a Minimum Price, it automatically executes, so you have the comfort of a guaranteed price and low maintenance.
Basis: If you feel the futures prices will improve, this contract lets you lock in the basis portion and set futures later. This allows you to actively manage your final grain price at a level and time you choose. There is more risk, but more reward and lower cost if you see a futures price increase.
The Basics of Basis
Basis is the spread between the local cash price for your grain and the futures reference price. When you settle a grain contract, you receive the futures price plus or minus the basis.
Other contracts you can set the basis on, independent of futures, include ADM AdvantageSMExpert (where grain marketing experts price your contract) and averaging contracts like Average Seasonal Price (ASP™) and Price Accumulator™.
Let your ADM representative know what your cash needs will be and what breakeven price you’re trying to protect. That way, they can suggest contracts that capture your target and free up operating cash in time to cover your obligations.
“Know your breakeven, and if you can beat it, lock in some sales to cover fall and spring costs,” says Menke. “A little planning can make a big difference.”
Contact Your ADM Representative Today
Want to meet cash demands and still stay disciplined in your marketing? Work with your ADM representative on an annual plan, just as you do with your lender. We’re here to help.
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ADM is providing this communication for informational purposes, and it is not a solicitation or offer to purchase or sell commodities. The recommendations in this communication do not take into account any particular individual’s or company’s objectives or needs, which should be considered before engaging in any commodity transactions based on these recommendations. The sources for the information and recommendations in this communication are believed to be reliable, but ADM does not warrant or guarantee the accuracy of the information or recommendations. ADM or its affiliates may hold or take positions for their own accounts that are different from the positions recommended in this communication. The information and recommendations in this communication are subject to change without notice.