While many grain growers came to FarmTech looking for insight on where markets may be headed in the coming year, Brian Voth challenged those attending his sessions with a different perspective on the game.
Lured in by his title of ‘The Seven Deadly(ish) Sins of Grain Marketing,’ attendees soon found the Manitoba-based market adviser wasn’t going to give them predictions — only principles.
Voth urged farmers to have a brokerage account and to use it, in conjunction with a solid marketing plan. Being disciplined and sticking to the plan, he admitted, doesn’t come easily to farmers. That’s mostly because of these seven pitfalls of life, that are just as dangerous to grain sellers.
In a farm context, this means wanting to sell your grain at the very highest price, said Voth.
The irony is you never know it’s the highest price until it’s long gone. He pointed to 2013 when old-crop canola was selling for $14.25 a bushel, so farmers didn’t want to lock in new-crop canola at $12.70. Turns out prices have never really been back to that $12.70 level since.
His point? Every crop year needs to be approached independently from the previous one, and a good marketing plan should reflect that.
Voth defined excessive indulgences as consuming more than required.
In a grain farm context, he related that to knowing your costs of production and determining an ROI (return on investment), and then ignoring that figure because of a desire for more. Farmers need to have a target ROI, and when it’s hit, sell at least a portion of the crop to reduce price risk and lock in some profits.
Voth called this the biggest enemy of any marketing plan. He said that too often farmers get hung up on yield and price instead of the profitable aspect of their production. Wanting a ‘little bit more’ can end up costing the most.
Farmers are hard workers, but Voth said many get lazy when it comes to grain marketing.
They like the production part of farming, but only do marketing because ‘they have to,’ he said.
The old market adage about prices taking the escalator up and the elevator down is often true, he added, and being proactive on marketing pays off way more than having to be reactive.
He used the example of a farmer who has four different elevator companies in his line of sight, but has only ever dealt with one, refusing to even phone the others just to compare prices.
Basis levels are the key signal to watch here, since that’s how elevators tell you whether or not they want your grain, he said.
That’s how some farmers feel about their marketing decisions.
Voth’s advice was to not beat yourself up about choices you made or didn’t make. Once you make a move, it’s best to carry on and focus on what you have left to sell instead of grumbling if prices go higher.
Spend too much time in the local coffee shop where everyone is comparing prices and you’ll feel discontented because someone’s always got a higher one. Every farm operation is different and you shouldn’t make the neighbour’s numbers your own measure of success. Don’t waste your time on jealousy, he said.
This is the one ‘sin’ that Voth found the hardest to relate to farming.
He said he’s proud of farmers who stick with their marketing plan and who take pride in their profession. But he cautions there can be trouble when farmers are too proud to ask for help. They hire accountants, lawyers, agronomists, and mechanics, but often feel they can handle marketing themselves. Voth’s advice is to focus on what you’re good at, and outsource the expertise in the rest. Remember to run your farm like the business it is.
Voth, whose firm is called IntelliFARM Inc., claimed there is more money to be made, or left on the table, through good or poor marketing, than in any other aspect of farming.
“Markets have changed a lot in the last 10, 15 years,” he said. “Twenty years ago, a job like I do probably wouldn’t have existed because the markets didn’t move enough to make a difference. “Now it’s become so much more high risk that the timing of these sales becomes more critical.”
And by being aware of the temptations, your marketing ‘sins’ will be fewer and less severe, he concluded.