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How to Leverage Offers

Secure a price you set without watching the markets 24/7
By ADM Grain Marketing
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“By taking emotion out of the sale, an offer is a good way to make sure you cross that goal line.”

-Matthew Kroes, ADM Origination Specialist

 

When it comes to keeping your farm’s balance sheet in the black, using offers with the help of your ADM representative is a proven way to achieve your grain marketing goals. It is a disciplined, incremental way for moving grain and working toward a profit, rather than trying to top the market in a single, dramatic play.

For a timeless summary of the fundamentals of offers, listen to what ADM Grain Origination Specialist Matt Kroes said in Episode 32 of the In The Driver’s Seat podcast. Kroes works in ADM’s southern Indiana/northern Kentucky region.

Firm vs. Soft Offers

One of the main distinctions to understand, says Kroes, is the difference between firm and soft offers:

  • A firm offer sets an exact price and a number of bushels. When the market reaches that price, the sale of those bushels takes place, with no further decisions necessary by the producer or the grain originator. These sales can come in the middle of the night or while you’re busy harvesting.
  • A soft offer sets a price range without necessarily setting a number of bushels. When the market reaches that range, the ADM representative calls to gauge your interest—do you want to sell a certain number of bushels now? Do you want to wait? The soft offer triggers this kind of conversation. The downside is that market conditions may have changed without a sale being made.

Firm offers let you focus on your farm operation and give you a “set it and forget it” tool for marketing. Emotions tend to be the enemy of a disciplined marketing approach so firm offers remove that obstacle.

Selling In Gradual Increments

When making offers, Kroes recommends thinking in crop portions rather than number of bushels to sell at one time. Selling your projected harvest in graduated increments can help give you the margin you need while also managing risk. This method aims to cover the cost of production first, and then help the operation cross over into profitable territory. Consider selling, for instance, 20 percent of production at one price, another fifth at a dime higher, and so on. The goal set in a firm offer is much more likely to translate to a sale that contributes to profits. Don’t get caught waiting for a high that never seems high enough to pull the trigger.

Tips for an Offer Strategy

  1. Do Your Homework: Calculate your break-even and aim for a profit margin on a meaningful portion of your crop. Think in terms of percentages versus bushels, so the sales have an impact on your bottom line.
  2. Communicate: Make a phone call to your ADM representative to develop a marketing plan.
  3. Execute on Sales: Be willing to adjust if conditions change, but don’t pull your offer when you think markets are heading higher. Your target made sense for your bottom line, so grab that sale and offer the next portion of your crop at a slightly higher price. This “laddering” technique takes advantage of rising markets but keeps you disciplined. Don’t hold out for pennies and miss out on dimes.
  4. Establish Next Target: Continuously make incremental sales that make sense for your operation.

 

“I feel like the highest-price grain I’ve bought as an employee of ADM has been in the offers that I’ve booked. And I also think, oftentimes, it’s been the highest price the producer’s been able to sell, so it really does work well for both.”

-Mark Lipcaman, ADM Regional Sales Manager

 

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ADM provides this communication for informational purposes, and it is not a solicitation nor offer to purchase or sell commodities. The sources for the information in this communication are believed to be reliable, but ADM does not warrant the accuracy of the information. The information in this communication is subject to change without notice. If applicable, any information and/or 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. ADM or its affiliates may hold or take positions for their own accounts that are different from the positions recommended in this communication.