Tips For Maximizing Your Grain Profits

If you watch the future’s market, you know that crop prices are volatile. In such a quickly changing market, maximizing your profits may feel like Russian roulette. It may be difficult to time your grain sales so you actually make money, not to mention earn a decent profit. Before selling your crops and calling your grain transport companies, consider the following profit strategies.

Track Grain Prices and Basis

You don’t have to sit in front of a computer constantly checking grain prices. However, you should stay current in your pricing knowledge. Today, you can track grain prices through several apps, and your elevator company may even offer a service that texts you several times each day with updated pricing.

Your crop basis has patterns and varies based  on location and local demand, and tracking and comparing the basis to previous seasons will signal whether you should sell or store your grain. For example, if the contract price is lower than or near the elevator price, it is a good time to sell your grain. A better basis in a different location may also suggest a better market, and therefore higher profits, in that area.

Calculate your Storage Expense

If the current market price is low, you may choose to store your grain until the price rebounds. If you own storage bins, storage cost will be minimal or nothing. However, storage can be costly if you have to rent grain bins or local elevator space. Storage is typically priced per bushel per month, so the amount and duration of storage affects your profit margins.

To avoid storage, you may sell directly to the end customer right from your field. You may also sell futures (forward contracts) that apply to the following year’s grain, but this is very risky.

Transportation

Whether you have sold your grain or need to store it in a rental or elevator location, you will require transportation. Grain is typically hauled using truck transportation from the farm to the elevator or first customer. It may then be moved using other services, such as rail or water transport.

If you choose to transport your own grain and have the equipment, you need to account for the costs of owning and maintaining all your transportation equipment, including depreciation and repairs. Then, this cost should be compared to the amount you save on transportation. The amount saved should exceed the equipment and cost to transport the goods yourself.

Your profits don’t have to be completely dependent on current market prices. Develop a sales and marketing plan that addresses these strategies to maximize your profit.