Right now, it’s a hard time for farmers selling corn off the combine given low grain prices across the country.
Cash spot prices in Chicago recently hit their lowest levels since August.
Last week, prices hit a low of $3.15.
To put this into perspective, we’ve only seen lows of $3.11 two times in the last five years.
Meanwhile, wheat prices continue to slide due to international price pressures from competitors like Russia. And soybeans? The front-month contract has been very volatile since the October WASDE report. With the corn and soybean harvest coming to a close, farmers continue to flood the markets with grain. Prices continue to slide.
Savvy farmers need a plan to get higher grain prices in today’s crowded market.
For this reason, we’ve put together the five most important strategies that you can use to ensure that you’re getting the best price possible when you decide to sell your grain.
Understand the Cycles of Grain Prices
First, it’s vital that you understand the nature of the marketing calendar.
Historically, the final weeks of the harvest are a time that we can expect suppressed prices for grain. With a supply outpacing demand, the natural economics lesson points to lower prices.
Understanding seasonality is critical. Supply and demand vary at different times of the year. The standard trading months for grain reflect the common patterns for the seeding, harvesting, and grain marketing of the crops. In the spring, when seeding occurs in the corn and soybean markets, the grain being sold is the old crop that was harvested in the previous year.
In the fall, this corn and soybean crop being harvested and solid is typically new crop. This is important because both periods reflect different supply and demand variables. It’s essential that you look at historical prices to know where prices were to better predict future prices.
Negotiate Your Grain Prices on Basis
Do you understand how basis trading works?
If not, you are walking into grain negotiations well unprepared. The basis is the difference between the local spot (cash) price and the futures market price for the time and delivery of the commodity. The futures market is important because it offers a buyer an opportunity to hedge and shift the price risk associated with the volatility of the asset.
The basis is important because it can provide individuals with a glimpse into local market conditions, especially when it comes to supply and demand. Grain quality, availability, the impact of weather all play into the supply and demand balance.
Get Your Grain Tested
Do you and your neighbors all grow the same grain? You might both harvest corn, soybeans, durum, and more, but every farm’s grain is very different.
Your grain may have different specifications from your neighbors. And these specifications can be the ticket to higher prices to buyers around the country. For example, if you’re growing wheat in the Dakotas, and you have higher protein levels than other farmers near you, this grain is likely worth more money. Now, you might not know the value because some grain elevators don’t test for every specification possible that could be worth a few more cents per bushel… or more.
That’s why it is essential that you get your grain tested to understand the factors that buyers want and need to fill their programs. As Courtney Boryski, a grain trader with Hansen-Mueller, told us, if farmers have high-quality protein in any market, particularly that meet her unique specifications, she’s willing to explore a deal. Knowing your specifications is the only way to attract the attention of buyers.
Market Your Grain to More Buyers
Today’s local markets don’t give farmers too many options when it comes to customers. Too often, farmers have to drive their grain to the local elevator and take the offered price. But the explosion of e-commerce has made it possible to market your grain beyond the traditional elevator networks. You should consider marketing your grain online, year-round to see if there are buyers outside of these networks that are looking to buy specific types of grain. When more buyers come to the table, prices rise.
The more people who have knowledge of your grain, the greater the opportunity to get a higher price. If you’re a Canadian wheat farmer, consider an online market that allows you to sell to buyers in the U.S. where you might find a better price for high-protein content.
If you’re a U.S. canola producer, you might want to market your grain in Canada when supplies are tight in the Great White North. Just be sure that if you’re trading across borders that you know how to convert your supply into local metrics. The easiest way is to use a grain conversion tool.
Sell to Financially Verified Buyers
Finally, we want to talk not just about the number of buyers you want to access, but also about the quality of these buyers. Every farmer knows a horror story about someone being promised a price for their crop, only to see the deal fall through due to the buyer’s finances.
It may be your own story, or something happened to a family member or a neighbor. When this happens, it can cost you time, headaches, and – of course – a lot of money. If a deal falls through and prices decline, the opportunity costs can add up quickly. That’s why you need to ensure that you know the financial situation of your buyers before you even start the negotiation.
You need to verify their finances and know that the check will clear when the deal closes.
Is It Even Possible to Do All Five of These Things?
It’s a tough market. In the past, it was difficult to do one or two of the things that we’ve listed above, let alone all five. If you want to get the best price possible, you are at the mercy of a yearlong sprint that forces you to navigate a myriad of challenges.
But today’s e-commerce world has brought about a lot of change. What if I told you there was a place to accomplish not one, not two, not three, not four, but ALL FIVE WAYS listed above to ensure that you’re getting the best price possible?
- FarmLead is North America’s most innovative marketplace. At FarmLead, we give farmers all the tools they need to get the best price possible and pay less for transactions.
- FarmLead’s Price Discovery tool gives the farmer a complete file of historical pricing data to help them make more informed calculations and set expectations for future price trends.
- FarmLead’s Basis Negotiation tool allows farmers to trade on the basis and never lock themselves into a cash price when making or receiving an offer.
- GrainTests.com, another part of the FarmLead ecosystem, gives farmers access to grain testing facilities all across North America. When farmers obtain specifications that buyers want and need to make a decision, their grain stands out against the crop of other sellers in their region.
- Finally, FarmLead goes through an extensive process to verify the credit of buyers across North America. Every buyer goes through a rigid process to ensure that if they agree to a deal, our farmers receive money.
The best part of it all? It is free to start negotiations with buyers on FarmLead, and the transaction costs are a fraction of what a traditional broker demands these days.
Sign up for free and start getting the best price possible for your grain today.