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Cash Grain Marketing Archives - Farm Girl Next Door http://farmgirlnextdoor.com/category/grainmarketing/cashgrainmarketing/ Sun, 31 Jul 2022 22:55:20 +0000 en-US hourly 1 https://wordpress.org/?v=6.9.4 http://farmgirlnextdoor.com/wp-content/uploads/2019/01/FGND_Color-e1546391130712-150x150.png Cash Grain Marketing Archives - Farm Girl Next Door http://farmgirlnextdoor.com/category/grainmarketing/cashgrainmarketing/ 32 32 It’s Course LAUNCH WEEK! (August 1-5, 2022) http://farmgirlnextdoor.com/its-course-launch-week-august-1-5-2022/ Sun, 31 Jul 2022 22:55:18 +0000 http://farmgirlnextdoor.com/?p=1543 If you’ve been waiting to enroll in Farm Girl Next Door’s online courses, Cash Grain Marketing 101 or Grain Marketing 201, they’re now open for enrollment THIS WEEK ONLY (Monday, August 1st – Friday, August 5th)! P.S. I only open the courses up for enrollment a couple times a year, so don’t miss out! Curious...

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If you’ve been waiting to enroll in Farm Girl Next Door’s online courses, Cash Grain Marketing 101 or Grain Marketing 201, they’re now open for enrollment THIS WEEK ONLY (Monday, August 1st – Friday, August 5th)!

P.S. I only open the courses up for enrollment a couple times a year, so don’t miss out!


Curious which course is right for you?
See which description below fits you the best & check out the links to learn more!

“The Beginner”: Very little/no prior marketing knowledge. Wanting to learn about the cash market (i.e. how to read a cash bid sheet, what basis is, etc.):
Cash Grain Marketing 101
“Ready to take it to the Next Level” : Has already taken 101, or has a really good handle on the cash market, and is looking to learn the basics about hedging using futures, and when and why to consider buying put option or call options:
Grain Marketing 201
“The Ultimate Grain Marketing Foundation”: Wanting to gain a comprehensive, fundamental understanding (or refresh) on the basics of cash grain marketing AND futures and options. (P.S. this is the best bang for your buck!):
The Bundle: Cash Grain Marketing 101 + Grain Marketing 201

The beauty of these online courses is that they can both be taken on your own time, at your own pace. Once you sign up, you have access to the course content for 1 year so you can refer back to them whenever it works for you!

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If you’re selling off the combine but think the market will continue to rally, how can you still stay in the market? http://farmgirlnextdoor.com/harvest-marketing-options/ Tue, 05 Oct 2021 22:09:12 +0000 http://farmgirlnextdoor.com/?p=1497 Article written by: Samantha Trcka, Risk Management Associate | StoneX Financial Inc. Ready or not, harvest is here! The long hours spent planning, planting, hoping, and now harvesting can take a toll on a person. Now comes the time to put your marketing plan in action. For some, that plan includes putting the crop into...

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Article written by: Samantha Trcka, Risk Management Associate | StoneX Financial Inc.

Ready or not, harvest is here! The long hours spent planning, planting, hoping, and now harvesting can take a toll on a person. Now comes the time to put your marketing plan in action. For some, that plan includes putting the crop into a bin until it is time to sell and deliver. While others rely on harvest delivery to town.  

If you fit the latter description, you may feel torn between selling grain now to the elevator/cooperative and paying monthly storage fees hoping the market continues to rally. 

So that begs the question, what options are available to you when selling off the combine but think the market could move higher? How can you remain a player in the game? 

Here is a look at 4 different contracts/strategies to consider when bringing grain to town. 


Extended Price Contracts
(with your grain buyer)

How it works:

– Sell grain at the current cash price 
– Choose what futures month to enter within the current crop year
– Elevator buys a futures contract, allowing you to remain in the market
– Upon the decision to exit, elevator sells the corresponding futures position
– Final cash price = original cash price +/- any gain/loss on the futures position 

Benefits

– No longer subject to storage fees, secondary shrink, discounts, or basis change
– Risk
– If futures go up, you gain; if futures go down, you lose 

The Cost

– Varies by elevator/coop, but typically a couple cents/bu administrative fee 
– Sometimes a fee to roll contract months 


Minimum Price Contracts
(with your grain buyer) 

How it works

– Lock in a floor price on the grain sale
– Select the call options underlying futures month and futures exchange 
– Elevator/Coop buys a call option on behalf of your account, allowing you to take advantage of increases in the futures market after you’ve sold the grain
– Title of grain is transferred to buyer upon delivery 

Benefits

– Take advantage of a potential futures price increase at a point in the future
– No storage charges or additional charges if the market moves lower
– Full minimum price is paid upon delivery (less the premium paid for call option)

Risk

– With a set basis, you cannot take advantage of any basis gains 

The Cost

– An upfront premium charge for the cost of the option 


Price Later Contracts
(with your grain buyer) 

How it works

– Deliver grain without establishing a cash price 
– Passes ownership to the buyer when contract is issued 

Benefits

– Take advantage of futures and basis improvements
– Move grain when convenient while pricing later

Risk

– Subject to downside market risk 
– No payment until the grain is priced 
– Can only sell at the current cash bid when deciding to price 

The Cost

– Check with your local cooperative/elevator about free price later offerings
– Typically charged a small fee 


Working with Broker/Introducing Broker (IB)  

How it works

– Use a broker/IB to buy/sell futures and options representing portions of your grain

Benefits

– No physical commitment of grain, just a paper transaction used to accumulate gains/losses
– Broker may provide professional marketing advice along with trading services

Risk

– Can result in losses 
– Must maintain a brokerage account (margin calls) 
– Must offset any hedge position you have with the broker

Futures/Options trading isn’t right for everyone, call a brokerage firm to decide if it fits you and your operation 

Find a qualified broker at https://www.stonex.com/Contact-Landing-Page/
Or contact me directly at Samantha.Trcka@stonex.com or 952-852-2914


This material should be construed as the solicitation of trading strategies and/or services provided by the FCM Division of StoneX Financial Inc., or StoneX Markets LLC (“SXM”) as noted in this presentation. These materials have been created for a select group of individuals, and are intended to be presented with the proper context and guidance. Information contained herein was obtained from sources believed to be reliable, but is not guaranteed as to its accuracy. These materials represent the opinions and viewpoints of the author, and do not necessarily reflect the viewpoints and trading strategies employed by the FCM Division of StoneX Financial Inc. or SXM. The trading of derivatives such as futures, options, and over-the-counter (“OTC”) products or “swaps” may not be suitable for all investors. Derivatives trading involves risk of loss and past financial results are not necessarily indicative of future performance. Any hypothetical examples given are exactly that and no representation is being made that any person will or is likely to achieve profits or losses based on those examples. The FCM Division of StoneX Financial Inc. is not responsible for any redistribution of this material by third parties, or any trading decisions taken by persons not intended to view this material. This material does not constitute an individualized recommendation, or take into account the particular trading objectives, financial situations, or needs of individual customers. Contact designated personnel from the FCM Division of StoneX Financial Inc. for specific trading advice to meet your trading preferences or goals. All references to and discussion of OTC products or swaps are made solely on behalf of SXM, a member of the NFA and provisionally registered with the CFTC as a swap dealer. SXM’s products are designed only for individuals or firms who qualify under CFTC rules as an ‘Eligible Contract Participant’ (“ECP”) and who have been accepted as customers of SXM. Reproduction without authorization is forbidden. © Copyright 2021. All rights reserved.

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The market is trading higher than we’ve seen in years, so why is it so hard to make marketing decisions? http://farmgirlnextdoor.com/decision-making/ Tue, 04 May 2021 00:21:33 +0000 http://farmgirlnextdoor.com/?p=1459 I sold my house about a year and a half ago.  You know what the market did after that?  Skyrocketed. That’s right. At the time, I thought we were reaching the top. Yet it just. kept. going. higher. So of course, I kept looking back thinking, “Why didn’t I just hold onto it a little...

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I sold my house about a year and a half ago. 

You know what the market did after that? 

Skyrocketed.

That’s right. At the time, I thought we were reaching the top. Yet it just. kept. going. higher.

So of course, I kept looking back thinking, “Why didn’t I just hold onto it a little longer?!”

It’s a dangerous thing looking back on decisions. We want confirmation that we made the right decision, and we subconsciously seem to think we can pick the market high.

We can’t.

The same thing goes for grain marketing. Especially in years like this year where we hit new market highs, and then the market continues higher.

Unfortunately, when the market just keeps steadily creeping higher, it actually paralyzes you.

You’re nervous to make a decision because if you sold, you now see the $$ you missed out on as you watch the market surpass your selling price.

Even though you’re better off because you can sell additional grain for a higher price, it’s still hard not to think about what you could have made if you still had that grain to sell too.

So, is there anything you can do to help make the decision making process easier?


Here are three potential marketing options to consider:

1. Buy a call when you make a sale. Sometimes called a ‘courage call,’ buying a call option gives you the courage to make a sale because if the market moves higher, the call option will gain value. And if the market doesn’t move higher, you are just out the investment you made in the call option.

2. Set up a plan for an incremental selling strategy. i.e. set a price target to sell a certain quantity, then a higher price target for another set of bushels, and so on. You can even set firm bid offers with your grain buyer or broker for those price targets so the strategy can execute without your intervention. Those offers are really helpful when you’re busy – you just don’t have the time to watch the markets every second of every day!

3. Use an averaging contract with your grain buyer. These are handy because each day during the specified pricing window, an equal portion of the bushels you put on the contract get priced at the daily closing price. Thus, you get the piece of mind that you’re selling bushels every day. And, in most cases, you get to choose the pricing window.


All in all, it’s not easy to make decisions in this type of a market. It seems like it should be because prices are good and you can’t really go ‘wrong’ selling at these price levels, but it’s easy to get stuck in indecision.

If you’re stuck there, consider trying out one (or more!) of the marketing options mentioned above to help decrease the decision making pressure.

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What did the first group of Cash Grain Marketing 101 students think of the course? http://farmgirlnextdoor.com/cgm101-reviews/ Mon, 18 Jan 2021 15:23:14 +0000 http://farmgirlnextdoor.com/?p=1395 All I can say is, “WOW.” I’m sure you can all relate to this. When you work on something, stress over it, go back and forth on whether it’s good enough or not, and then finally release it, it’s nerve wracking. I mean I sent this course out into the world and then prayed it...

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All I can say is, “WOW.”

I’m sure you can all relate to this. When you work on something, stress over it, go back and forth on whether it’s good enough or not, and then finally release it, it’s nerve wracking.

I mean I sent this course out into the world and then prayed it would meet or exceed your expectations.

The last thing I wanted to have happen was to have someone walk away dissatisfied because they didn’t learn what they expected to or gain enough value from what they received.

I could not have been more thrilled with the response.

Now, don’t get me wrong, there will be changes I make for the next enrollment at the end of February. But I’m so incredibly thankful for this initial group of students and their raving reviews.

Check out what students in the December/January cohort thought below!

And if you’re interested in taking the Cash Grain Marketing 101 course and experiencing what they have, it will be open for enrollment from February 19th – 23rd.

Because I have worked full time off the farm since we started the farm in 2007, I haven’t gotten to be involved in as much as the day to day as I would like. One area that always really intimidated me were grain markets. It always seemed so daunting to understand what all those numbers on the chart meant and how Mike makes the decisions to sell when he does.

About a month ago, Mike was checking out my instagram and noticed a Cash Grain Marketing Course that was being offered by Britany @nefarmgirlnextdoor I quickly signed up and I’m so glad I did!

The course runs over several weeks but is work at your own pace. Britany breaks it all down with easy to understand analogies that relate to things that anyone would understand. Taking the course has allowed Mike and I to discuss more how he markets our grain and I have been able to understand and follow along with what he is talking about! I look forward to being able to serve a bigger role in this integral part of the operation in the future.

This course actually exceeded my expectations particularly in the amount of links to quality grain marketing information-from trend analysis of corn and soybean pricing to the spreadsheet that you developed for us to track pricing, etc. I was not expecting to have tangible resources to use but I can see that these will stick with me and prove helpful for a long time to come.

It is a great course for a general understanding to start with without overwhelming you.

I have actually encouraged my husband to watch some of the lessons! It gives one a clear understanding of the basics of marketing in a calm manner, providing education while removing the emotions!

My brain literally shuts off when the words “grain marketing” are spoken. BUT I found this class that Britany is teaching. I started today and am on lesson three and am actually learning something!!!

I would say this is helpful to the partner/spouse that is not as active in marketing and wants to learn and take more of a role in that. It also gave me added knowledge from the basics I already knew.


If you’re interested in joining the next round of students in Cash Grain Marketing 101, be sure to sign up for my email list so you don’t miss the next enrollment window (Feb 19th – 23rd)! Sign up here: http://eepurl.com/gjiPEb

Looking for more information about the course? Click here: farmgirlnextdoor.teachable.com/p/cash-grain-marketing-101

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Why we use offers to help execute our marketing plan http://farmgirlnextdoor.com/why-we-use-offers/ Mon, 04 Jan 2021 23:26:24 +0000 http://farmgirlnextdoor.com/?p=1379 Want me to tell you a sin I committed Sunday evening (1/3)? I did what every good marketing advisor says you shouldn’t do. I checked to see if there was a way to remove the firm bid offer we had in for $4.75 cash corn for February delivery to our local grain buyer when the...

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Want me to tell you a sin I committed Sunday evening (1/3)?

I did what every good marketing advisor says you shouldn’t do.

I checked to see if there was a way to remove the firm bid offer we had in for $4.75 cash corn for February delivery to our local grain buyer when the market was getting close to filling it…

I can’t believe I just told you that because it goes against everything I believe in, but hey, it’s a new year.

And this year, I want to be more transparent around what we’re actually doing and thinking about when it comes to grain marketing on our farm.

This is real life for us, just like it is for you.

So why did I want to remove an offer that was about to fill for a price we’re targeting?

It’s on our marketing plan, it’s profitable, it’s a price we’re happy to receive after several years of poor prices…so what the heck?

Because I was letting my emotions get the best of me, that’s why.

I was sitting there watching the overnight trading session thinking,

“But what if it goes higher, we don’t want to limit ourselves?! Maybe we could get $5!”

I know better than that.
I know better than to let the emotion of a rally cloud my vision.
I know better than to think I should try to predict the market and ‘bet’ on higher prices when there’s an equally good chance it could go lower.

So after all that, here’s why I like offers and why I think you should consider using them if you don’t already.

Because I couldn’t take that offer out on Sunday evening, it filled. And then on Monday, when I was sooo nervous we were going to miss out on another big up day, the market finished lower.

And the cash price for February closed at $4.64.

So that’s why I like offers – they keep you disciplined.


If you’re new to firm bid offers or orders, here are a few key things to remember:

– Offers/orders can be used in the cash and futures markets:
You can put in offers with your grain buyer for a variety of cash contract types, or put in orders for futures or options trades with your commodity broker.

– FBO = Firm Bid Offer
A firm bid offer automatically executes (i.e. creates a contract) if the market trades through the price you were targeting with the offer.

– GTC = Good till cancel
The order will remain active and able to fill until you cancel it. So be sure you keep tabs on what active offers you have out there that could execute!

– To create an offer, you’ll need to decide on the price you’re targeting, contract or trade type, bushel or contract quantity, and the offer/order expiration date.

– Offers/orders can fill during the either the day time or overnight trading sessions


Use offers as a tool to help you execute on your marketing plan and stay disciplined. I know we’ll continue to do so on our operation.

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CASH GRAIN MARKETING 101 | Your most frequently asked questions ANSWERED http://farmgirlnextdoor.com/course-faqs/ Sun, 06 Dec 2020 05:00:12 +0000 http://farmgirlnextdoor.com/?p=1339 1. I don’t have any experience with grain marketing, will this be over my head? No way! If you’re just getting started and trying to understand grain marketing, this course is for YOU. No prior grain marketing knowledge or experience required–that’s what the course is for! 2. I don’t think I have the time for...

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1. I don’t have any experience with grain marketing, will this be over my head?

No way! If you’re just getting started and trying to understand grain marketing, this course is for YOU. No prior grain marketing knowledge or experience required–that’s what the course is for!

2. I don’t think I have the time for this…

That’s the benefit to an online course – it’s self-paced & pre-recorded, so you can take it at your own pace. However, if you follow my course schedule, you can get through it with JUST 30 minutes a week in 5 weeks. I’m pretty sure we all spend more than 30 minutes a week (I know I do) mindlessly scrolling through social media that we could better utilize.

3. If it’s self-paced and on my own, how will I stay accountable and ask you questions if I need help?

There’s more to this course than just education, there’s an opportunity to build community. You will have access to an EXCLUSIVE course participant Facebook group. In this group, I’ll host weekly live Q&A sessions for 5 weeks where you can hop on and ask me questions. We’ll interact with one another through the group and keep each other accountable.

4. My husband (or someone else on the operation) does all the marketing, so I don’t need to learn it.

I beg to differ. You’re 50% of your operation — you need to understand the process for selling the commodities you raise, at least at the most basic level. You definitely should feel confident that if you had to, you could step in and market grain. Not to mention, I bet your husband would LOVE if you would take part in the grain marketing conversations and help make decisions.

5. I’m not sure I’m ready to pay $199.

Let me ask you a question. When’s the last time you invested in yourself and took the time to learn something that would be valuable for your operation? We pay thousands of dollars on equipment to improve our operations each year — but what about investing in ourselves and improving our ability to run the operation? Don’t discount the value of personal development.


Does this sound like you?

“I want to learn more about grain marketing, but I feel a little bit like a fish out of water. I’m not even sure where to start when it comes to understanding the basics of grain marketing.”

If this sounds like you, Cash Grain Marketing 101 is just what you need, and I’m ready to help you get started on your journey to better understanding grain marketing.

Whether you want to help make the marketing decisions on your operation, or you just want to stop feeling lost when you hear commodity brokers, grain merchandisers, or the farmers in the coffee shop talking about grain marketing, then join me by clicking the link below.

I can’t wait to meet you!

I’M READY TO ENROLL


P.S. don’t wait – enrollment is only open from Dec 6th- Dec 10th.

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Why should you be tracking cash bids? http://farmgirlnextdoor.com/tracking-cash-bids/ Mon, 16 Nov 2020 20:03:38 +0000 http://farmgirlnextdoor.com/?p=1247 I’m forgetful. There, I said it. I’ll own up to it… And now the Farm Guy Next Door just heard (read) me admit it. I have to write things down or else it’s like they disappear into thin air and are never found again. (i.e. some things the Farm Guy Next Door tells me and...

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I’m forgetful.

There, I said it. I’ll own up to it… And now the Farm Guy Next Door just heard (read) me admit it.

I have to write things down or else it’s like they disappear into thin air and are never found again. (i.e. some things the Farm Guy Next Door tells me and I fail to retain.)

Maybe that’s why I’m the self-proclaimed queen of to-do lists.

I love a good list. If something is written down, I won’t forget it. Not to mention, the list gives me something tangible to refer to and gives me the satisfaction of being able to cross things off.

When it comes to grain marketing, I’m not great at committing specific dates and prices to memory.

I’m not the girl who can answer questions like,
“What was the elevator paying in January?”
or “Exactly how much has the corn futures price moved in the last month?”
or “What was harvest basis back in July?”
off the top of her head.

What I can do, however, is find the answers if they’re documented.

And that’s the reason it’s so important to track cash bids consistently and regularly.

When I say ‘track cash bids,’ what I mean is to keep a record of what the bid was at a grain buyer for a specific delivery period on a certain day.

The frequency in which you track bids is flexible.
You could track bids daily for the grain buyers you care most about. Or, you could decide to track them weekly on the same day and time each week.

The important thing is to document the bids in a place that will make it easy for you to access and analyze. Personally, I like spreadsheets.

Tracking cash bids consistently helps you learn about the facilities you deliver to and understand price trends once you build up a data set.


Think about this, if you’re just starting to dabble in the marketing on your operation, chances are, you haven’t looked at the cash bid sheets for your local grain buyers for all that long.

Thus, it takes some time to get familiar and understand things like:

What’s the ‘typical’ basis level for harvest at the facility? When was the cash price for delivery in January at its highest over the last year? Has basis been steadily getting stronger or weaker since harvest? When was the best opportunity to sell our stored grain last year – did we miss out or did we sell something close to that price?

When it comes time to decide if basis is weak or strong, or whether the cash price is higher now than it has been for the past couple of months, how are you supposed to know?

By tracking bids, that’s how.


Here’s how to get started:

1. Pick 2-3 grain buyers (or more!) that you want to track bids for.

2. Pick the delivery period(s) you want to track.
i.e. Do you want to watch the spot price (AKA the price they’re posting for delivery for the current day), the harvest bid, and/or another delivery period you typically make sales during?

3. Each day, or each week on a specific day, document the full details of the bids you’re tracking from each buyer’s bid sheet.

4. BE CONSISTENT – I suggest setting a reminder in your phone


EXAMPLE:

Let’s say I’ve decided to watch the SPOT & HARVEST bids for the Cargill & ADM facilities near us.

I’ve decided to track cash bids every Monday at 3pm.

It’s 3pm on Monday, so I go to Cargill’s bid sheet and I copy down the bid information (delivery dates, futures price, futures month, basis, cash) for their spot and harvest bids for soybeans and corn in a spreadsheet.

Then, I access the ADM bid sheet and I copy down the same information for their spot and harvest bids in the spreadsheet.

For all bids copied down, I make sure to note the current date I documented them on.

Then, I do it all over again the following Monday…and the following Monday after that… 🙂


All in all, tracking cash bids will help you:

1. Become more familiar with your local market

2. Understand price trends

3. Create a resource to refer to when you have questions about when and how prices have moved or want to understand price trends


Wish you had a framework and someone personally leading you, step by step, through bid tracking to get you started?

I get it– I like more specifics and an easy to follow template too! Because of that, I have a whole module dedicated to teaching you how to track cash bids, step by step, in my new, online course that will be opening for enrollment on DECEMBER 6TH!

P.S. The course includes a bid tracking Google Sheet template too!

To stay up to date on the course details & to be notified when the cart is OPEN for signup, join my email list here! http://eepurl.com/gjiPEb

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A happy hour coming to a couch near you! http://farmgirlnextdoor.com/happy-hour/ Wed, 11 Nov 2020 17:11:32 +0000 http://farmgirlnextdoor.com/?p=1313 I’m not sure I can properly articulate to you how much I love happy hours. First off, I love deals. Happy hours were made for my deal loving heart. Second, happy hours are the perfect pick-me-up when you just need to chat through things with your people. If you like happy hour as much as...

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I’m not sure I can properly articulate to you how much I love happy hours.

First off, I love deals. Happy hours were made for my deal loving heart.

Second, happy hours are the perfect pick-me-up when you just need to chat through things with your people.

If you like happy hour as much as I do, bring your favorite drink (or make the new recipe I’ll be sending you!) and join me and other great people in Ag as I answer allll your burning questions about grain marketing in a virtual happy hour.

Reserve your seat at my virtual bar by signing up below for either (or both!) day that works best in your schedule! Cheers!


Sunday, December 6th at 8:30pm
Sign up here!

or

Wednesday, December 9th at 8:30pm
Sign up here!


(P.S. I have a fun drink recipe that will be sent to your email once you sign up for either happy hour above! I know it’s not a clutch drink deal at your favorite bar, but hey, we’ve got to do what we can in this new virtual life.)

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What does it mean to make Incremental Sales? http://farmgirlnextdoor.com/incremental-sales/ Mon, 19 Oct 2020 21:03:33 +0000 http://farmgirlnextdoor.com/?p=1235 I’m trying to put together a gallery wall of wedding pictures in our living room. Have any of you tackled a gallery wall? If you have, you know how overwhelming it is. If you haven’t, let me explain it to you. When I see these beautiful gallery walls with unique pictures of different sizes, shapes,...

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I’m trying to put together a gallery wall of wedding pictures in our living room.

Have any of you tackled a gallery wall?

If you have, you know how overwhelming it is. If you haven’t, let me explain it to you.

When I see these beautiful gallery walls with unique pictures of different sizes, shapes, and different materials all placed in a cohesive piece of art hanging on the wall, I feel so inspired.

And then I go to a site and find a hanging canvas I like, but I don’t know what size to order it in to make it fit.

I go to another site and find they have canvases on a sale and I want to order one, but I don’t know what shape to order it in that will fit.

I have an existing piece of art I made from my wedding bouquet, but I don’t know how to make sure the pictures I order fit cohesively with it.

So, what I start doing is taking it piece by piece. I order one thing at a time, then figure out what I need next that will keep the design cohesive.

Gradually, I add one item after another instead of making one big commitment and risking it all not working together.

If you’ve listened to me on #marketfactmonday or read some of my previous blogs, you know that I like to talk about making incremental sales when it comes to your grain marketing plan.

But have you ever heard me say that and thought to yourself, “What does she mean by incremental sales?”


Now’s the time for me to explain it for you!

When you make incremental sales in grain marketing, it’s not all that different from building a gallery wall.

Here’s the definition of incremental sales:
Breaking up the total quantity of a commodity you have to sell into smaller chunks that you sell at different price targets.

Let’s think about using a staircase to envision incremental sales. Imagine you’re standing in the basement holding pieces of paper in your hand that add up to the total quantity of bushels you have to sell of a certain commodity.

The first stair in front of you has the first price target and bushel amount written on it, the second stair has the second price target with another bushel amount written on it. As you look at each stair moving up the staircase, the price targets are higher as you go up.

If the market meets your first price target, you sell and create a contract for the quantity and price written on the first stair. You take the quantity that’s written on the first stair out of the pile in your hands and leave it on the first stair.

Then, you take the remaining grain you have to sell and wait for the market to reach your second price. Once it does, you repeat what you did when the market reached your first target.


Now, how do you implement this?

Think about the average price you want to achieve once you’ve sold all of your production for a certain crop year.

Then, decide how many bushels you want to sell at each price target that will result, when you take a weighted average of all the sales, in the final price you’re aiming for.

The bushels you decide to sell could be the same at each target, a certain percentage of your total production, different quantities you decide on that you’re comfortable with, etc. There’s no right or wrong answer as you determine what quantity to sell at each price target or how many price targets you need.

Check out an example below.


Corn Example:

Overall average price goal = $4.25 cash
Total production to sell = 200,000 bushels

Price Target 1 = $4.00 | 30,000 bushels
Price Target 2 = $4.10 | 30,000 bushels
Price Target 3 = $4.20 | 30,000 bushels
Price Target 4 = $4.30 | 30,000 bushels
Price Target 5 = $4.40 | 30,000 bushels
Price Target 6 = $4.50 | 30,000 bushels
Price Target 7 = $4.60 | 20,000 bushels

Weighted average price if all targets are reached and associated bushels sold at the target price = $4.285


Keep in mind, when you establish price targets, that doesn’t mean the market will move and meet them all by the time you need to make sales (or ever).

You’ll have to re-evaluate them as you go. However, the important thing is to establish the overall average price you want to sell your production at, the number of sales you want to make and the quantity to sell each time, the target prices that will get you to your weighted average goal price, and then…EXECUTE! 🙂

The post What does it mean to make Incremental Sales? appeared first on Farm Girl Next Door.

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Using Futures Pricing Orders During Harvest http://farmgirlnextdoor.com/futures-pricing-orders/ Mon, 05 Oct 2020 20:21:32 +0000 http://farmgirlnextdoor.com/?p=1214 Hope harvest is going well for you all! If you’re reading this in the tractor, it should provide you between 2-5 minutes of educational “entertainment.” 🙂 Over here, we just finished up beans and moved on to corn. Considering we’re in the thick of harvest, let’s talk harvest marketing and a strategy that may be...

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Hope harvest is going well for you all!

If you’re reading this in the tractor, it should provide you between 2-5 minutes of educational “entertainment.” 🙂

Over here, we just finished up beans and moved on to corn.

Considering we’re in the thick of harvest, let’s talk harvest marketing and a strategy that may be valuable for you to try.

In many cases, unless you can store all your production on farm, you’ll find yourself delivering grain that you don’t have forward sold.

When you don’t have a contract to apply the grain to, what do you typically do?

Well, most people choose to ‘spot’ the load, or sell it for the cash price at the end of the day.

Today, I want to give you another option to consider.

Have you ever used a futures pricing order?

A futures pricing order gives you more time to price futures on the grain you delivered, without paying storage.

Let’s work through the following:


1. How a futures pricing order works

2. Advantages & Disadvantages


How it works:

You deliver a load (or loads) of soybeans to the elevator today. For the sake of the example, let’s say you hauled in 3,900 bushels.

You think there’s a chance to capture a few extra cents on futures in the market environment we’re in. However, you’re busy and know you can’t watch the price fluctuations all day to catch it.

So what do you do?

You create and apply the 3,900 delivered bushels to a basis contract at $-0.65 SX0.

(side note: basis must be set on grain prior to or at delivery unless it’s being stored commercially, so that’s why we have to establish basis.)

Then, you put in a pricing order to price futures on the basis contract. You decide to put in the order $.07 above the current market price.

*Remember, the cash price equation is: Futures + Basis = Cash.

Futures and basis can be set separately to establish your cash price. If your futures pricing order fills, you will then have both components (futures & basis) set, and the cash price on the contract will be established at that time.

Here’s what your contract will look like:
bushels: 3,900
delivery: 10/5/20 (today)
basis: $-0.65
futures month: SX20
futures: —
cash price: —

Futures pricing order:
bushels: 3,900
price: $10.28 SX0
order expiration: 10/30/2020

*The futures pricing order will continue to run until it fills, until the expiration date you set on it, until you cancel it, or until you’re forced to price or roll the contract due to the expiration of the futures month.


Advantages & Disadvantages

Advantages:

  • You give yourself more time to price futures and an opportunity to capture a higher price than what is posted today.
  • You have the flexibility to change the price of the order or cancel the order at any time.
  • The order executes without your intervention–you don’t have to watch the combine head with one eye and the markets with another and make a call to set futures.
  • The order can fill in the overnight trading session.

Disadvantage

  • The market may fall after today and you would’ve been better off spotting the bushels at today’s price.

If you decide using a futures pricing order sounds like something you’d like to do, give your local elevator or your marketing advisor a call.

I’m sure they’d be happy to explain it and answer any questions you have.

Just like all marketing options, evaluate whether this option is right for you.

Remember, just because we like to use futures pricing orders on our farm doesn’t mean they’re the right solution for everyone!

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