Along the Fencerow

ORIGINALLY WRITTEN BRADLEY GOERING
Where have the profits gone? Farmers crunch numbers all the time to see where their production costs are so they can make a living.

Several years ago, K-State did a farm profitability study comparing technology, yield, management and marketing.

It was surprising that the least effective use of a farmer’s time is spent marketing his production. The greatest area for improving profits was through higher yields, followed by technology, and then management.

These three areas were all pretty close in the measurement of profitability.

Why would marketing be so far back in the equation? Are farmers most unfamiliar with marketing using futures, options, forward contracting, or other methods?

Since farmers have no direct control of the marketplace, it isn’t an area where they don’t have control and may be frustrated because they are “price takers.”

In a survey done in Kansas, Iowa and Texas, 27 percent of producers and land owners marketing their production use cash marketing practices. Meanwhile, 36.5 percent use forward contract oriented marketing practices, and the remaining 36.5 percent use futures/options marketing.

The differences in grain marketing management practices among producers differ based on what producers have access to on their farm.

For one example, on-farm grain storage may be limitated. Therefore, these farmers will utilize 100 percent commercial grain storage. Some farms may be equipped to do both.

Studies show that cash grain marketers mostly fall into the commercial grain storage category. But, as time progresses, more producers are using an aggressive marketing approach.

More farmers in the area may sell grain across the scale, but they will buy it back on paper to take advantage of any price increases in the future.

Year in and year out, a realistic marketing goal is to market as much grain as possible in the top one-third price average for the year. To get more information on this top third, your local county extension office or farm elevator is a good starting point.

Bradley Goering can be reached by e-mail at bgoering@thecsb.com, or by telephone at 620-327-4941.

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