Plan Before You Plant: Spring Markets Won’t Wait
You’ve purchased inputs, your fuel tanks are full, and you’re ready to roll. In just days, you’ll be planting. But have you really prepared for a new crop year? Not without a marketing plan. A few hours of planning now will pay off later—maybe a lot.
To help in the next crucial days, here are a few tips from ADM Merchandisers: Miranda Wamsley, who serves most of Central Illinois for ADM; and Dacy Larkins, who serves the tri-state region joining Illinois, Missouri, and Kentucky:
1. Get markets working while you’re in the field.
It’s not convenient, but the best time to sell grain is often spring. For example, eight years out of 10, the corn markets do better from February through June than at harvest. Getting into the market now could bring you closer to your targets.
“This is a good window to be selling,” says Miranda. “With a potential battle for acres or weather factors, the markets can move overnight. Have conversations with us before planting about setting price objectives and putting firm offers in. Then when you get busy, you have those things in place to execute.”
“Get your ducks in a row before duck hunting season,” Dacy agrees. “Think through your farm plan, your acreage, and bushels—and earmark that information with some price points. That way, when it comes time to pull the trigger, you have all the information you need to make good business decisions.
2. Set two targets: What you want and what you need.
Without a goal, you have no control. Whether you figure a price target from your expenses, or peg it off your crop insurance or production history, setting a goal is step one in marketing. In fact, you should have two prices in mind.
“When you have a market like we do now where the price isn’t where you want it, you need to determine where you need it,” says Dacy. “What’s your fail-safe and where do you jump out of the market? That’s where we go into protection mode and put risk mitigation into the plan.”
Miranda asks her farmers for a time frame. “If we don’t hit your first objective, at what point do we move to Plan B? Having a Plan B is really important, because we might not hit your target. At what point do you change from working to be profitable to going for break-even?”
3. Make offers to get the ball rolling.
With price targets set, a safe way to start new-crop marketing is to make offers. (Using the ADM Offer Management app, you can do it 24/7 from your mobile device. Download it from iTunes or Google Play.) Offers can trigger automatically—and if they don’t, at least your merchandiser knows your goals.
“A pricing target and an offer—they’re both a great starting point,” says Miranda. “Once we have those in our system, we can follow up based off what your need is. If the market stays lower than your offer, but the Price Accumulator contract comes closer, for example, we can let you know and ask whether you’d like to put some grain in that contract.”
Dacy agrees that offers are a good start to your marketing. “They really get you thinking about different ways to arrive at what you actually need,” he says.
4. Stay in control with a mix of marketing tactics.
Along with sales through offers, there are other smart tactics for this time of year. Here are some popular solutions that get your remaining old crop sold—or start to market your 2017 bushels:
- Price Daily – Customize a window of time this spring and capture the market’s average price during those weeks.
- Price Accumulator – Get a futures price typically higher than the current market—provided you’re willing to sell a premium to today’s market at a specific trigger point. An optional guarantee adds protection in case the market falls.
- Basis or Hedge-to-Arrive (HTA) – Free up cash by selling and delivering grain on a Basis contract, and set the futures later. Or, lock in the futures price today on an HTA. The remaining basis part of the transaction is set before delivery.
- Cash – Turn your offers into a sure thing by accepting a firm price for future delivery.
Sometimes contracts together are better than one alone. Your ADM merchandiser is knowledgeable about pairing them up for an even better edge.
“One of my favorite [combinations] would probably be the Price Daily paired with the Price Accumulator,” says Miranda. “It’s a flexible and under-utilized contract at times of the year when you’re really busy. The averaging feature gets you a good time frame, but you’re still in the driver’s seat to price out early, and you can still put in offers and opt out of the average if your offer triggers.”
Dacy likes the Price Accumulator paired with a flexible delivery option—whether to ADM, or to a local ethanol plant or poultry producer, for example. If available in your area, this combination gives you the advantage of securing an attractive futures price, while letting you decide when and where to deliver and lock in your basis.
“When the Price Accumulator works its magic, it typically allows you to receive a futures price that’s not possible in the market today,” he says. “And Flex Delivery lets you decide when and where the best price is for your grain. You can get extra cents by using the tools we have.”
5. A sound plan is worth repeating.
Many years, you should consider selling a percentage of your expected production before or during planting, say Dacy and Miranda—more when spring markets are higher, like they’ve been this year with soybeans. Let your ADM rep know your price goals and they can help with a strategy for 2017 and beyond.
One last piece of guidance is this: “You can’t jump in and out of good plans and expect results,” says Dacy. “Have a plan that spans multiple years and follow through year in and year out. Consistency seems to be the way to go in these markets.”
Your operation handles a lot of money. You deserve the edge that a grain marketing plan and a caring ADM Merchandiser can provide. But call them now—before you get too busy.
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