What does it mean to make Incremental Sales?

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

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! 🙂

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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.

Now, how do you implement this?

Corn Example:

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.