One of the most difficult decisions for farmers is when to sell grain. Basically, a decision to sell grain should incorporate the following assumptions:
1. Farmers should create and utilize enterprise budgets to calculate the costs of the commodity raised. An enterprise budget accurately details your fixed and variable costs on a per acre or bushel basis to raise the commodity. It is often not possible to know if a grain price is good or bad without this information. Go to the following website to download crop budgets ( http://aede.osu.edu/Programs/FarmManagement/Budgets/index.htm ), or stop in at an Extension Office for copies of OSU enterprise budgets.
2. Grain marketing decisions by farmers should be based upon:
a. What is offered to you by existing grain markets, crop insurance products, and government programs?
b. By knowledge of grain marketing alternatives
• Costs and returns to storage
• Analysis of historical market trends. For example for the period of 1990-2007, University of Minnesota, Center for Farm Financial Management found 75% odds that corn spring price will exceed fall price.
• Knowledge of local cash markets and concomitant basis trends. For example, in some areas a strong positive basis for early soybeans may be offered or an opportunity may exist in some years to contract grain at higher moistures without discount into an ethanol plant or livestock finishing operation.
3. Farmers cannot consistently predict major market moves and therefore should not speculate excessively.
4. Grain marketing should be based upon probabilities. This may seem like gambling, but a farmer who plants a crop in the spring is using a probabilistic approach. A farmer believes that there is a good chance a crop will be produced to market in the fall. This type of thinking is based on probability. Ask yourself when the last time was that you didn’t have at least a half crop to sell. Many might respond “2002”. Even then, corn in our area of Ohio ( Crawford County ) averaged 73 bushels/acre. The point is this: it is likely you will produce at least an average crop this fall.
5. Grain marketing should be based on your risk bearing ability . If you have many debts to service, you should not allow marketing opportunities to pass when the total costs of production can be paid and therefore debt be serviced.