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How To Develop A Rock-Solid Grain Marketing Plan

July 26, 2019 by Daniels Trading| Ag Marketing

From planting to harvest, every year brings a collection of unique challenges. Extreme weather and tariffs are two that have recently played leading roles in the grain marketing plans of producers across the United States. If nothing else, these fundamental market drivers have emphasized the importance of taking a measured approach to battling the unknown.

As a producer, you’re the CEO of your own company. It’s your responsibility to maximize each crop’s potential and competently align risk to reward. While this task is much easier said than done, accomplishing it successfully is the name of the game.

However, there’s good news. Through a little due diligence, you can develop a robust grain marketing plan. By addressing your yields, contracting, and crop pricing, you can routinely avoid most uncertainties.
Learn 7 basic and out-of-the-box strategies for success in Guide to Smarter Ag Marketing: Fixed Risk Hedging. 

Production Estimates

As in most commodity-based industries, production is profitability in the ag sector. Accurately estimating crop yields is the first step in building any marketing plan. If you’re going to manage risk and maximize reward, you must first know what a healthy harvest looks like.

In practice, projecting crop yields with precision is a challenge. Here are a few items that can help remove much of the guesswork from the process:

  • Planting efficiency: Examining planted acres versus damaged acres is the first step in projecting harvest strength. Significant planting delays and limited acreage are two areas that may severely undermine output.
  • Historical performance: A simple look at the yields of past years with respect to planting conditions can be useful in establishing a baseline for this season’s expectations. As the planting and growing seasons unfolds, comparisons to historical norms are vital to projecting the coming harvest’s strength.

Understanding what a normal planting and crop looks like is a good first step in estimating yields. Barring outliers, this analysis is capable of generating viable ballpark production figures.

Crop Contracting

When it comes to selling your crop before it’s in the silo, there are no steadfast rules. The idea of locking in profit is tempting; however, doing so does comes with a collection of opportunity and real costs. A key part of any solid grain marketing plan is determining how much product to take to market and how much to sell in the field.

The reality of contracting your crop ahead of time is that production estimates must be spot-on. If your crop falls short of contract obligations, then making up the difference will dip into profits. Conversely, grain spot prices are historically lower come harvest time; locking in prices at seasonal highs typically involves premature contracting.

To successfully walk the contracting tightrope, the key is to remain flexible. By making incremental commitments, you’ll be able to modify your marketing plan as the growing season dictates.

Incorporate Futures into Your Price Targets

After production estimates are completed and contract percentages determined, it’s time to incorporate pre-harvest price targets into the grain marketing plan. It’s imperative that price targets for your crop are realistic and attainable. While shooting for the stars may be attractive, there are no guarantees that the markets will support ambitious pricing.

A great way to ensure that your pricing targets are strong is to calculate your per-bushel production costs. This figure is extremely valuable in determining the crop’s break-even point, which may then be directly compared to current spot and futures pricing. The difference between figures is essentially the available profit ― whether to lock it in on the futures or spot markets then becomes the decision at hand.

Need Help Building Your Own Grain Marketing Plan?

At first glance, building a strong grain marketing plan can appear to be a daunting task. Predicting yields, developing sales plans, and pricing crops are delicate undertakings that directly influence profitability. In order for your plan to be rock-solid, these numbers must be grounded in reality and as accurate as possible.

The good news is that you don’t have to go it alone. If you’re searching for customized marketing options, look no further than the resources available at Daniels ag. Featuring a team of dedicated pros, daily expert commentary, and the DanielsAg mobile app, Daniels has everything you need to get the most from your harvest.

Guide to Smarter Ag Marketing

Filed Under: Ag Marketing

About Daniels Trading

Daniels Trading is division of StoneX Financial Inc. located in the heart of Chicago’s financial district. Established by renowned commodity trader Andy Daniels in 1995, Daniels Trading was built on a culture of trust committed to a mission of Independence, Objectivity and Reliability.

Risk Disclosure

The StoneX Group Inc. group of companies provides financial services worldwide through its subsidiaries, including physical commodities, securities, exchange-traded and over-the-counter derivatives, risk management, global payments and foreign exchange products in accordance with applicable law in the jurisdictions where services are provided. References to over-the-counter (“OTC”) products or swaps are made on behalf of StoneX Markets LLC (“SXM”), a member of the National Futures Association (“NFA”) and provisionally registered with the U.S. Commodity Futures Trading Commission (“CFTC”) as a swap dealer. SXM’s products are designed only for individuals or firms who qualify under CFTC rules as an ‘Eligible Contract Participant’ (“ECP”) and who have been accepted as customers of SXM. StoneX Financial Inc. (“SFI”) is a member of FINRA/NFA/SIPC and registered with the MSRB. SFI does business as Daniels Trading/Top Third/Futures Online. SFI is registered with the U.S. Securities and Exchange Commission (“SEC”) as a Broker-Dealer and with the CFTC as a Futures Commission Merchant and Commodity Trading Adviser. References to securities trading are made on behalf of the BD Division of SFI and are intended only for an audience of institutional clients as defined by FINRA Rule 4512(c). References to exchange-traded futures and options are made on behalf of the FCM Division of SFI.

Trading swaps and over-the-counter derivatives, exchange-traded derivatives and options and securities involves substantial risk and is not suitable for all investors. The information herein is not a recommendation to trade nor investment research or an offer to buy or sell any derivative or security. It does not take into account your particular investment objectives, financial situation or needs and does not create a binding obligation on any of the StoneX group of companies to enter into any transaction with you. You are advised to perform an independent investigation of any transaction to determine whether any transaction is suitable for you. No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior written consent of StoneX Group Inc.

© 2023 StoneX Group Inc. All Rights Reserved

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Risk Disclosure

The StoneX Group Inc. group of companies provides financial services worldwide through its subsidiaries, including physical commodities, securities, exchange-traded and over-the-counter derivatives, risk management, global payments and foreign exchange products in accordance with applicable law in the jurisdictions where services are provided. References to over-the-counter (“OTC”) products or swaps are made on behalf of StoneX Markets LLC (“SXM”), a member of the National Futures Association (“NFA”) and provisionally registered with the U.S. Commodity Futures Trading Commission (“CFTC”) as a swap dealer. SXM’s products are designed only for individuals or firms who qualify under CFTC rules as an ‘Eligible Contract Participant’ (“ECP”) and who have been accepted as customers of SXM. StoneX Financial Inc. (“SFI”) is a member of FINRA/NFA/SIPC and registered with the MSRB. SFI does business as Daniels Trading/Top Third/Futures Online. SFI is registered with the U.S. Securities and Exchange Commission (“SEC”) as a Broker-Dealer and with the CFTC as a Futures Commission Merchant and Commodity Trading Adviser. References to securities trading are made on behalf of the BD Division of SFI and are intended only for an audience of institutional clients as defined by FINRA Rule 4512(c). References to exchange-traded futures and options are made on behalf of the FCM Division of SFI.

Trading swaps and over-the-counter derivatives, exchange-traded derivatives and options and securities involves substantial risk and is not suitable for all investors. The information herein is not a recommendation to trade nor investment research or an offer to buy or sell any derivative or security. It does not take into account your particular investment objectives, financial situation or needs and does not create a binding obligation on any of the StoneX group of companies to enter into any transaction with you. You are advised to perform an independent investigation of any transaction to determine whether any transaction is suitable for you. No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior written consent of StoneX Group Inc.

© 2023 StoneX Group Inc. All Rights Reserved

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