Why Hiring a Grain Advisor Matters
August 16, 2021
Grain markets are fast pace and never sleeping. There is no shortage of information (positive or negative) at any given moment. Reality is, cost of production, timing and trend analysis are all fundamental in determining profitability in-conjunction with risk management.
It’s important to stay on top of markets, by understanding trends so you can maximize financial returns. The simple regurgitation of commodity prices without a clear understanding of underlying grain supply and demand relationships or trends is to a large degree limited. If grain supply for whatever reason is limited and demand outstrips supply the grain commodity price will tend to increase rationing supply.
Depending on the degree of supply/demand functions and their inherent trends, it might be better for the farmer to hold grain sales as prices move higher with time. Farmers might not fully appreciate the market direction and trends without insight into commodity market charts, inversion, carry geopolitical or global weather events.
Grain purchasing agents are tasked with accumulating cost-effective grain volumes. Producers need to where possible cover their cost of production and attain a profit. Commodity markets do not necessarily respect any farmer’s cost of production if there is an oversupply relative to demand. The farmer seeks the best price possible making sure sales are in the best interest of the farm. You need a clear and concise understanding of market conditions and trends to be able to execute profitable sales within your risk tolerance.
Grain marketing is the implementation of a series of informed decisions made with real-time data, it creates intelligent decisions resulting in actions that turn grain into profits while managing risks. Grain trading is an inevitable part of farming, just not all producers are experts or comfortable in grain commodity analysis.
Farmer’s expertise typically is focused on the production side of farming not necessarily commodity trading. However, each and every farm is unique, the difference between upper quartile farm profitability is planning and executing a grain marketing strategy that puts the farmer in control of his or her financial returns.
Farm Management Canada (July 2015), conducted a survey as to the SEVEN best management practices between top tier farms across Canada from others.
1. Life Long Learning, 49% were committed to attending conferences, workshops, webinars, reading. It’s important to continue expanding knowledge in an ever-changing world in order to make informed business decisions.
2. Accurate financial data, Business decisions made using accurate financial data scored a 59% adoption rate. COP changes yearly.
3. Farm advisory services. 32% replied they sought the help of business advisors/consultants. There’s a business saying, do your best, hire the rest.
4. Written business plan. 26% adopted having a “written” business plan”. Too often there might be a plan, but it’s not written down. Including a grain marketing plan.
5. Cost of production. 50% know, COP. Financial statements tell you how the farm is doing, but you may be investing in farm activities that are losing you money.”
6. Risk management plan. 32% have a plan to mitigate risks.
7. Financial plan and budget. 33% use budgets to monitor positions. Profitability requires financial literacy. Understanding scenarios that affect profitability and having a plan to mitigate. Liquidity is the lifeblood of your farm.
Exceed Grain Market Advisors offer unbiased, professional advice with real-time data in consideration of grain market trends based upon expert analysis. You know you’re making informed decisions.
Exceed sales recommendations take into account farm-specific structure in addition to commodity-specific seasonality, weather, anomalies, and geopolitical concerns with respect to market dynamics.
Specific farm cash flow, loan payments, capital requirements, storage, and inputs all play a part in determining when a grain sale is timed right for a specific farm. Having a strategy in place is the best way to take advantage of market dynamics.
Remember, three components drive profitability, Yield, and all the dynamics associated with it (agronomy, environment, etc.), Commodity Price, how do you consistently achieve above-average prices, and Cost of Production (COP). A lot of capital is spent on land, equipment, fertility, crop protection, etc., though surprisingly little on grain marketing which can generate a huge return on its investment and to farm profitability.
Working with a professional Exceed Grain Marketing Advisor will help you develop top profitability within your risk tolerance parameters. Exceed your expectations.