Put grain marketing on auto steer when—When you can

By Wm. Bruce Clevenger and Garth McDorman, Ohio State University Extension

A common reason grain marketing plans fall short is simple: They never get executed. Many plans are well‑designed on paper — with clear bushel amounts, target dates, price goals, and percentages. But when the season gets busy and urgent tasks pile up, marketing often slips to the bottom of the list. We’ve all been there: the market rallies for a day or two, and later we catch ourselves thinking, “I should have made that call.”

Most pre-harvest plans are built around price strength because of seasonality that often appears from late March through mid-June. But even the best grain marketing plan can’t help the operation if it stays hung on the fridge or on the farm office desk.

An even riskier approach is relying on a “mental” marketing plan. Without something written down and scheduled, daily responsibilities take center stage and marketing decisions get pushed aside. A clear, written plan that’s revisited regularly — and acted on — helps ensure you capture opportunities instead of watching them pass by.

Auto-steer for a grain marketing plan? Auto-execute some of a grain marketing plan? There are tools and strategies that involve sharing your grain marketing goals with grain company buyers and letting some of the plan become automated.

Average price contracts are a strategy that establishes a price per bushel from the average daily closing futures price of a new crop contract during a specific period — often late-March through mid-June. Example: averages the December corn futures daily close price during the spring period. This approach does not use options, but rather the historical tendency that harvest futures contract prices are stronger during the averaging period rather than selling grain at harvest out of the field.

What about accumulator contracts? Who wants to potentially price their grain for 20, 30, or even 40 cents higher than the current market price? Everyone, right? Well, maybe you can. There must be a catch, right? Sort of but let’s explain. Accumulator contracts are marketing tools that can enhance the price you receive for your grain meaning they allow you to price grain at a higher level than the current market. However, if the market drops below a certain price, the contract may stop pricing and leave you with unpriced bushels.

Let’s look at an accumulator contract example. First, we need to establish how many bushels we’re willing to sell, the pricing period, and the delivery period. We’ll use corn for this example, with the current futures market trading at $4.70. A grain company offers the following accumulator levels: an accumulation price of $5.00 and a knock‑out price of $4.30. If the futures price stays above $4.30 during the pre-determined pricing period, all your committed bushels will be sold at the accumulation level of $5.00.

Now let’s talk about the risks associated with an accumulator contract. First, we’ll address the knock‑out price: if at any point during the pricing period the futures market trades at or below $4.30, the contract will stop pricing bushels at the accumulation price. At that point, the remaining bushels will be unpriced.

Another risk of an accumulator contract is the potential double obligation. This can occur if the futures market settles above the accumulation price on the final pricing day. Using our example, if on the final pricing day, the futures price is $5.15 and your accumulation level is $5.00, you will be obligated to sell twice the original quantity you committed, at $5.00.

Accumulator contracts come in many different forms, and each grain company may structure them differently, so understanding the specific terms is very important.

We explored a couple advanced contracts that can be used, now let’s simplify this topic some.

One of the most underutilized tools in grain marketing is simply open orders. Open orders can also be referred to as targets, offers, Good ‘Til Cancelled orders, or potentially other names depending on what company you do business with. Regardless of what you call them; they can be used throughout the year when you just simply don’t have time to watch the market. Determine a desirable price for your grain and let the grain purchaser set up an open order and let them watch it for you. It is a simple but effective way to market grain without putting a lot of time into it. Final note: these orders may not expire until they are filled or cancelled, so please don’t forget about them.

While grain marketing should never be entirely “set it and forget it,” automating certain goals with a grain professional can help protect you from the natural risk of overlooking price opportunities.

Consider enrolling into the OSU Extension Basics of Grain Marketing online course during the Summer session with open enrollment beginning June 1st. Contact http://go.osu.edu/grainmarketing ,email Wm. Bruce Clevenger clevenger.10@osu.edu or Garth McDorman mcdorman.15@osu.edu.