Adjusting marketing strategies with old crop grain still on-farm
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EmailStrategies to help you proactively market grain from two growing seasons.
Stored grain has been a major focus of 2024’s growing season ever since market prices started a sharp decline in December 2023. Lower prices have continually put the brakes on potential grain sales, leading to record amounts of production still in storage after June 1, 2024. This has driven many farms to circle markets in a holding pattern, waiting for something to change that will create better prices. This pattern is unfamiliar territory for many farms, especially those used to selling grain before planting season.
Navigating this unusual landscape requires careful planning and a dual approach to marketing both old and new crop grain. Reliance on pricing signals becomes important to recognizing market opportunities. While storage capacity and cost of production influence your pricing targets and marketing decisions, these come together with cash flow needs to help set decision deadlines and keep your market strategies moving forward.
Old crop versus new crop strategies
Pricing signals help tell you where market prices may be heading. Combining signals with price targets and decision deadlines narrows down what strategies to consider using.
Much of last year’s old crop grain still sits in bins instead of having been turned into cash. Cash that may be needed to pay bills, reinvest in capital, or pursue expansion of the business. Marketing this grain requires a tactical approach towards selling opportunities that meet cash flow needs. Especially if cash is still needed to invest in this year’s production.
In a tactical approach, fewer opportunities are expected to secure the best value on old crop grain before harvest. Once at harvest, old and new crop competition for bin space becomes an added cost concern. The primary pricing signal to pay attention to now is basis, or the difference between futures and cash prices. Local grain elevators set their basis on what they pay to ship, store and manage purchased grain. Opportunities for better pricing may be found simply by identifying which elevator offers a stronger basis.
At the same time, this year’s new crop production is in the field and a long way from harvest. It still needs attention and potential investment in nutrients, pests and water management. These types of cash flow needs may require old crop sales to help pay for new crop inputs. Those needs are in addition to any debt payments or tax-related input purchases made for next year’s crop.
A strategic approach focuses on securing best value based on long-term needs and pricing signals. Basis is also an important pricing signal for new crop grain. However, direction of futures prices, pricing tools, and carrying charges are additional factors to consider. These concepts can be reviewed through several resources:
- The MSU Commodity Marketing webpage offers articles, publications and decision tools, and more on commodity markets.
- The MSU Extension article price checking your grain marketing strategies reviews pricing signals and pricing tool options.
- Bulletin E-3416 Introduction to Grain Marketing provides educational information on grain markets, tools, strategiesf and market plans.
- The Purdue Center for Commercial Agriculture Crop Basis Tool offers a comparison of historical basis to current values.
Storing grain is a key factor
For those farms with old crop grain to market, new crop yields are important. Once new crop grain reaches harvest, it may find itself competing for bin space with last year’s production. If you are expecting average to above-average yields, the availability of storage may be a limiting factor. On the other hand, if lower yields are expected, current storage may be adequate. Another consideration is farms without old crop grain. If they are also expecting lower yields, there may not be enough production to fill their current storage. Empty grain bins present an opportunity for farms in need of additional storage, especially with old crop grain still on-farm.
Managing stored grain requires both a strategic and tactical mindset. First, you must strategically estimate potential needs that may exist at harvest time. Especially if basis or overall cash prices continue to remain unfavorable for old crop sales. Second, you should consider your window of opportunity limited to find and tactically secure bin space for all unsold production needs. You’ll want to identify what additional storage may exist, as well as what storage allows harvest efficiency and maintains grain quality at a reasonable price.
MSU Extension offers a walkthrough of these considerations in the article is available grain storage a concern on your farm?
Lastly, don’t guess … Know your cost of production
Marketing strategies are just guesses if you haven’t identified your cost of production. Knowing these costs helps to set minimum prices needed to break even and become your price targets for marketing decisions.
Keep in mind that the market may not offer a price equal to or above your cost of production. If prices remain low, your marketing decisions should focus on minimizing losses as much as possible. Minimizing losses may be true for both old and new crop strategies.
Costs for last year’s production should be readily available from farm records. This year’s production should rely on farm records and projected costs through harvest. Both sets of production should account for storage costs until estimated sales dates.
MSU Extension offers several resources to help find your farm’s cost of production.
- The Farm Cost of Production webpage offers articles, publications (and decision tools), and more on cost of production.
- Bulletin E-3411: Introduction to Cost of Production and Its Uses also describes how to identify cost of production and its role in decision-making.
- Finding Financial Success in Uncertain Times is an online course that is free and self-paced. The course is designed to help producers identify the uncertainties that exist within the farm business and how to achieve financial success through planning for and reacting to that uncertainty.
The market is constantly adapting and reacting to information that can affect prices and basis. Sometimes this information is unclear, which creates a risky environment in which to price grain. As a grain producer, you want to stay informed about changes in local or global supply and demand, which will allow you to be proactive about selling grain when price opportunities are available.
