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Grain Marketing 101 Archives - Farm Girl Next Door http://farmgirlnextdoor.com/category/grainmarketing/ 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 Grain Marketing 101 Archives - Farm Girl Next Door http://farmgirlnextdoor.com/category/grainmarketing/ 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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Feeling apprehensive about your marketing plan pre-report? http://farmgirlnextdoor.com/marketing-plan-prereport/ Mon, 29 Mar 2021 13:47:47 +0000 http://farmgirlnextdoor.com/?p=1453 Tell me. Are you risk averse, or a risk taker? Here’s where me and the Farm Guy Next Door sit on the scale of risk tolerance: If we’re making a bet on something trivial, I’m more likely to bet $5-10. He’s more likely going to bet at least $50-100. Now, my track record on winning...

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Tell me. Are you risk averse, or a risk taker?

Here’s where me and the Farm Guy Next Door sit on the scale of risk tolerance: If we’re making a bet on something trivial, I’m more likely to bet $5-10. He’s more likely going to bet at least $50-100.

Now, my track record on winning bets with him isn’t great, so that might play into my low risk tolerance. However, I can attest that this holds pretty true across the board when it comes to taking on risk.

Regardless of whether your risk tolerance is similar to mine or the Farm Guy Next Door’s, I think we all get a bit of apprehension prior to USDA reports. Often, we display this apprehension by asking a variety of questions to people in the industry prior to the report:

“Do you think we’ll have a bearish or bullish report?”
“Do you think we should we sell more before report day?”
“So what if the numbers are bearish, isn’t there a weather story later this summer that could bring a rally?”
“What if we sell now and end up missing out on a rally?”

Here’s the deal. You can go round and round with these questions and you might never get the answer you’re looking for. We all love to talk, hear others’ opinions, and formulate our own. But remember, no one can predict the report. And if they do this time, watch out, because next time they probably won’t.

Usually, I find that people are stuck in a place of indecision.

Not willing to sell because they don’t want to miss out on a rally or are apprehensive about forward selling any more bushels.
But also nervous about doing nothing, because they worry the market will fall and they’ll have missed an opportunity.

So what do you do?

Let’s talk about options. If you’re stuck in a place of indecision and apprehension pre-report, a put or call might be something to explore depending on what you’re worried about or want to protect.


Put option: Provides downside price protection. With a put option, you lock-in a price floor so that if the market falls below the strike price of the option, you have the right to sell at a price higher than the market. Your risk of loss is limited to the premium and fees paid to buy the option.

Relating this back to your pre-report thoughts, if you’re in the camp of concern over unprotected, unsold bushels and your risk of market prices falling if the report is bearish, buying a put option might be a strategy worth looking into.

Call option: Provides an opportunity to benefit if prices rally. When you buy a call option and the market rises above the strike price of the option, the call gains value. However, if the market doesn’t rally, your risk of loss is limited to the premium and fees paid to buy the option.

Let’s bring this back to your pre-report thoughts. Maybe you’re thinking about selling some bushels before the report, but you’re on the fence because you don’t want to miss out if the report is bullish and the market rallies. Buying a call option allows you to mitigate your FOMO (fear of missing out) 🙂 and capture value if the market rallies. Having a call in place so you won’t miss out if there’s a rally gives you the confidence to make a sale.


Takeaways:

– Remember to focus on making decisions based on your marketing plan, breakeven, and profit goals. Don’t make marketing decisions that are just bets on report opinions/expectations – that’s not a risk management strategy.

– Talk to your commodity broker or marketing advisor to discuss and determine if buying a put or call would be a good strategy for you and your operation. Our operations are unique, so it’s important to understand what’s a good decision for YOUR operation specifically.

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This might as well be written in Spanish… http://farmgirlnextdoor.com/is-this-spanish/ Mon, 08 Mar 2021 20:43:45 +0000 http://farmgirlnextdoor.com/?p=1425 “If ever there was a time to learn and utilize multiple marketing tools, it is this year. The near-term trend of sideways price action is providing you the opportunity now to position yourself with smart preplanned marketing decisions. Invest in the future by controlling volatility with the appropriate marketing tools that are right for you...

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“If ever there was a time to learn and utilize multiple marketing tools, it is this year. The near-term trend of sideways price action is providing you the opportunity now to position yourself with smart preplanned marketing decisions. Invest in the future by controlling volatility with the appropriate marketing tools that are right for you and your operation. A simplistic, yet balanced approach is to forward sell half your crop, buy puts on the other half, and buy calls to cover forward sales. You can confidently head to the field and have effectively positioned yourself for whatever way the market moves.”

Bryan Doherty, Successful Farming

This is an example of a well intentioned article about commodity markets. The shortfall? It requires that the reader has knowledge of the marketing strategies mentioned before he or she can get the most value from it.

When I read things like this, I have flashbacks to my high school Spanish class where we’d be given a short article, written in Spanish, and told by our teacher, “Just use context to decipher what unknown words mean in the text! This should not be that hard to figure out!”

And we all reacted with blank stares. It’s a little hard to use context when you only understand a few words in the whole article! He was grossly overestimating our existing knowledge.

The nice thing about this marketing article? At least it’s written in English. 🙂


My goal with Farm Girl Next Door has always been to write without the assumption that the reader has prior grain marketing knowledge.

So when I saw this article I thought, I bet someone read this and said to themselves, “I wish I understood the mechanics of calls and puts so I could explore that strategy further, because that section just went way over my head.”

So today, I’m breaking it down for you. Let’s re-look at part of the excerpt:

“A simplistic, yet balanced approach is to forward sell half your crop, buy puts on the other half, and buy calls to cover forward sales. You can confidently head to the field and have effectively positioned yourself for whatever way the market moves.”

Here are a couple of questions you might have when you read through this:

Q: What good does it do to buy puts on half of your production?
A: Put options protect a floor price.

If you’re worried the market might fall, you buy puts to limit your downside risk. Thus, buying puts on half of your bushels gives you piece of mind that you have downside price protection without having sales on the books. Instead of being entirely at the mercy of the market on the half of your production that is not forward sold, put options allow you to protect a floor price.

Q: Why would you forward sell half of your production and buy calls to cover those sales?
A: Buying a call option allows you to capture value if market prices rise.

Sometimes, you might feel nervous about forward selling too much because you don’t want to overcommit and miss out if prices rally. Buying call options gives you the courage to make forward sales. Why? Because when market prices rise, your call options increase in value. Thus, you can rest a little easier about making forward sales knowing that with bought calls in place, you won’t miss out entirely on increased value from a market rally.


I hope that helped give you more context…at the very least more context than what my high school Spanish teacher used to give us! 🙂

Be sure to send me an email (nefarmgirlnextdoor@gmail.com) if you run across something in an article about grain marketing that you wish someone would explain. It might just be the inspiration for another post like this!

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Buying a Put Option…Explained! http://farmgirlnextdoor.com/buying-a-put-option/ http://farmgirlnextdoor.com/buying-a-put-option/#comments Fri, 29 Jan 2021 16:19:40 +0000 http://farmgirlnextdoor.com/?p=1407 Also see: one of the most common questions I receive. In this post, I’m going to do my best to help you all understand what a put option is. In typical Farm Girl Next Door fashion, I’m going to do it with an analogy. Here’s the formal definition: A put option gives the option holder...

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Also see: one of the most common questions I receive.

In this post, I’m going to do my best to help you all understand what a put option is. In typical Farm Girl Next Door fashion, I’m going to do it with an analogy.

Here’s the formal definition: A put option gives the option holder the right, but not the obligation, to sell the underlying futures contract at the strike price by a certain date.

Ok, now for the analogy!

Let’s imagine you want to sell your house. With the current market, you are confident you could sell it today for $250,000. However, you’re not ready to sell yet. You want to wait until next year, but you’re worried about the market falling by the time you’re ready to sell.

Imagine that, for an investment, you could protect a selling price. Worst case scenario, you want to make sure it sells for at least $230,000. For $5,000, you could buy the option to sell the house with certainty for $235,000 by next year. Thus, after the $5,000 investment for that option, you’d net a selling price of $230,000.

Fast forward to next year when you decide to sell your house. Home values have increased and you can now sell it for $255,000.

Would you exercise the option you bought to protect a selling price of $235,000?

No, because why would you sell it for less than you can in the current market if you’re not obligated to? Remember, the option gives you the right, but not the obligation to sell at that price. In this case, you’d forfeit the $5,000 you paid to protect a selling price of $230,000.

Ok, now let’s imagine an alternative scenario. Instead of home values increasing, the housing market tanks. It’s next year and you can only sell the house for $220,000. In this case, you’re going to exercise your right to sell your house at $235,000 because that price is above the current market (Remember, you net a selling price of $230,000 after your $5,000 investment.)


Now, let’s think of this in terms of corn and protecting a floor price by buying a put option.

Imagine you have corn in storage that you plan to deliver in June or July, and you want to protect a floor price.

Remember our housing example? You had the same goal: you weren’t ready to sell yet, but wanted to protect a floor price.

Today, July corn futures (CN21) are trading at $5.30.

An ‘at the money’ (i.e. at the current market) $5.30 put costs $.46. An out of the money put at $4.90 costs $0.25. Of course, there are other puts to purchase between those two and outside of that range. These are just two examples.

So, depending on what you want to spend and what price you want to protect, you could buy a put to protect a floor price.

For the sake of this example, let’s say you buy the $4.90 put for a $.25 investment.


Let’s break it down:

Think of buying a put like an insurance policy. The $.25 is like your insurance premium. You hope you don’t have to use the premium, but if you do, you’re protected.

Let’s say you hold this put option until expiration on June 25, 2021. At expiration the market is trading below $4.90. It’s at $4.25. In this case, as the holder of a put option for $4.90, you have the right, but not the obligation to sell CN21 futures at $4.90, which is $.75 above the current market. Thus, your put is worth $.75 and you could exercise your right to sell CN21 at $4.90.

Your net price if you exercised the option would be $4.90 – $.25 investment = $4.65 (less any brokerage fees).

Now, let’s look at the alternative. At expiration, the corn market has continued to rally and CN21 is now trading at $5.75.

In this case, your put option expires worthless (i.e. you wouldn’t want to exercise your right to sell at $4.90 when the market is at $5.75). Thus, your investment of $.25 is not recouped. Again, think of it like your insurance premium. You invested in the put option for downward price protection, and while you don’t get the $.25 investment back, you still get to sell your corn at a higher market price since corn continued to rally. If you sold at $5.75, your net price would be $5.50 after the $.25 investment in the put option.


Alright, so key takeaways:

Buying a put protects a floor price.

As the holder of a put option, you have the right, but NOT the obligation, to sell the underlying futures contract at the strike price.

Buying a put requires an investment, that you may or may not recoup depending on where the market trades. If the market is above the strike price of your bought put option at expiration, then your put option expires worthless.

Keep in mind, this is a super simplistic example to help get your mind wrapped around a put option. There’s plenty left out of this, but be on the lookout for more to come in future posts. 🙂

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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.

The post Why we use offers to help execute our marketing plan appeared first on Farm Girl Next Door.

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Feeling Bullish? How to use a call option to capture value if the market rallies http://farmgirlnextdoor.com/buying-a-call/ Mon, 21 Dec 2020 20:54:34 +0000 http://farmgirlnextdoor.com/?p=1352 One of the most frequently asked questions I get on Farm Girl Next Door is, “How do I use futures & options?” Let’s start by talking Pelotons, because who hasn’t been talking about Peloton bikes and home gyms this year… What if back in January, someone bought an option for $50 that gave them the...

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One of the most frequently asked questions I get on Farm Girl Next Door is, “How do I use futures & options?”

Let’s start by talking Pelotons, because who hasn’t been talking about Peloton bikes and home gyms this year…

What if back in January, someone bought an option for $50 that gave them the opportunity to buy a Peloton at $1,000? The option expires at the end of the year. At that time, they won’t have to buy the Peloton, but they will have the opportunity to. If they decide not to buy the bike, they’ll simply lose the $50 they paid for the option.

Today, the price of a Peloton is $2,000. If they choose to exercise their right, they’ll pay $1,000 for the bike (or $1,050 total with the cost of the option included, which is $950 less than the current list price).

Or, they could sell this option to buy the Peloton for $1,000 to someone else. If I were going to buy a Peloton, I can tell you I’d be willing to pay more than $50 to that option holder to have the ability to buy the Peloton for $1,000 instead of $2,000. While I’m not willing to pay them $1,000 (the value of the increase in the bike price) for the option, I’d still be willing to pay more than $50. Thus, the value of their option increased, just not penny for penny with the increase in the price of the Peloton.

Enough about the Peloton and me wishing it were cheaper… 🙂

Let’s talk about how you could buy a call option to capitalize on increases in futures prices.

A call option = the right, but not the obligation, to buy a commodity at a specified price.

You don’t have to exercise this option to buy the commodity on the underlying futures contract, but when you buy a call, you get the opportunity to exercise this right if you desire to do so.

If the market rallies, the bought call becomes more valuable.

You won’t capture the value penny for penny as the market moves like you would if you bought futures, but it will increase in value as the futures price appreciates.

Furthermore, your downside risk is limited to the premium you paid to purchase the option. Compared to buying a futures contract, buying a call is less risky. With a futures position, you would lose penny for penny if the market falls.


Example Scenario:
You sold soybeans at harvest but have been listening to the bullish sentiment in the market. You already sold, but you want a way to take part in the market and capitalize on futures price appreciation. However, you’re not willing to buy a futures contract outright and risk your position losing value penny for penny if the market falls.

So, you decide to buy a call because it will gain value if the market moves up, but you’ll only lose the initial cost of the option if the market falls and the call expires worthless.

12/1/2020:
The March soybean futures price is currently trading at $11.63. You buy one March soybean (SH21) call option (5,000 bushels) with a strike price of $12.00.
The cost to buy this call option is $0.30/bu.

12/21/2020
The market has been moving up since December 1st. It’s now December 21st, and SH21 is trading at $12.44.
The $12.00 SH21 call option is now worth around $0.70/bu.

Thus, if you decide to sell the option today, you would capture $0.40/bushel ($0.70 – $0.30).

Note: The call option doesn’t move penny for penny with the futures price change. Futures improved $0.81, but the value of the call option improved $0.40.
Just something to be aware of with options. Their value doesn’t move penny for penny with the market price moves.


Now that we’ve looked at an example, let’s recap some fast facts about call options.

Buying a call…

  • means you have the right, but not the obligation, to buy the commodity on the underlying futures contract at the strike price of the option
  • gives you an opportunity to capture value if the futures price appreciates
  • limits your risk of loss to the premium paid for the option
  • is a good strategy to use if you think the market will rally and you want an opportunity to capture value if it does, but want to limit your downside risk to the premium paid for that option

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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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