Matt Bennett on Grain Marketing: Keep Your Head
When markets are bordering your break-even, it’s encouraging to hear from producers who are making it work. One straight-shooter on the speaking circuit is Matt Bennett. He grows corn and soybeans on a 3,000-acre farm in Illinois.
For Bennett, it all comes down to staying focused and preparing for unforeseen opportunities. “We’re all under stress right now,” he says. “It’s no secret that our working capital has diminished, and our cash has declined. Yes, 2019 is challenging, but there will be opportunities. We just have to be ready.”
A key part of Bennett’s strategy is forward marketing. He made money on soybeans last year by jumping on a spring rally and putting price protection under the rest of his bushels. To pick his brain on plans for this year, we caught up with him at the Farm Futures Business Summit in Coralville, Iowa. Hear Bennett on Episode 12 of our podcast, In the Driver’s Seat: Keep Your Head During Challenging Markets.
Some of Bennett’s top tips are:
Know your numbers: “In the elevator business, we noticed our more successful customers knew their average yields and what those yields looked like with current costs of production. When guys ask, ‘What numbers do I need for my break-even?’ I say it just depends on how good you want your number to be. Do you want it to be a dart board, or something you can count on, so if you market 25 cents over it, you’ll have 25 cents of disposable income?”
Harness your emotions: “Last spring I had farmers tell me, ‘I’d give anything to sell $4 corn and $10 beans.’ They didn’t have to wait long because we had a spring rally, but many farmers sat on their hands, thinking a weather rally in the summer would really put them in fantastic shape. They missed the rally they’d begged for, fearing they’d sell too cheap. Proactive marketers look at their break-evens. It’s served them well the last several years.”
Understand marketing tools:
“A lot of guys tell me, ‘I don’t want to get into futures and options,’ and I understand, it’s not for everyone. If they’re not used appropriately, they can sure get into a guy’s pocketbook. But as we try to get better, we’ve got to be open to new ways of doing business. Futures and options, if used appropriately, are risk management tools.”
Example: “Last December, I sold 15% of my 2019 corn at $4.06. If we get to $4.18, my plan is to be more aggressive, probably with 35% to 40% of production. If we get a bullish set-up, we’ll re-own most of our bushels—meaning I’ll buy a call above the market that will cost 10-cents or so. Because if we do end up getting to 50-60 cents higher than the current range, I don’t want to be sitting on the sidelines on bushels I sold ahead of time.”
“Don’t step into marketing out of fear the market’s going lower. Have a good reason.”
Make offers: “You can do offers with your hedging account or simply with your grain elevator. If you want to sell some corn at $3.80, call and tell them. Yes, the market’s 10 cents away right now, but it could move overnight. With offers in place, we don’t have to try to catch that cat by the tail. We’ve got a trap put in place already.”
Stay focused: “Don’t read the opinion of every analyst there is and wonder why you’re confused. They don’t know your farm; they’re just looking at market direction. Use those reports more as a framework. Why would I be aggressive before I ever plant a kernel of corn, if I can’t be profitable at that price? Don’t step into marketing out of fear the market’s going lower. Have a good reason. That goes back to having a well-devised plan based on numbers for your farm.”
Your ADM team can help with all of these strategies. Let us help you:
• Calculate your price targets (we recommend GrainBridge.com).
• Plot out strategies to capture those targets.
• Protect yourself with floors and upside features.
There’s no doubt 2019 comes with stress. But using the approach Bennett recommends could help you come out with a solid win.
Past performance is not indicative of future results.
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.