Simplifying the Marketing of 2010 Corn Production

Name: Scott J. Harms Company: Archer Financial Services

Years Trading: 19

I want to take some time this month and present some ideas and some tips for marketing your 2010 corn crop. It has been said that opinions are like noses, everyone has one. Well that may not be exactly how the saying goes, but you get the idea.  There are many ideas available when it comes to marketing your corn production. Most will be right some of the time and some will be right most of the time. A problem can arise when a producer attempts to create a marketing plan from the information of far too many sources. This can many times lead to "paralysis by analysis". Another problem that producers face when marketing their grain is the emotion that is tied to that decision. The focus should not be on trying to outguess the market, but rather to have a plan of action in place to take advantage of the market opportunities when they present the return to your operation that you reasonably expect. Farm magazines are full of them. University studies have been done on them. Commentators fill panels at meetings and on television to discuss them. There are plentiful opinions on the best way for you to market your grain. Without attempting to "re-invent the wheel", I am going to throw my hat into the ring by providing some simple tips to help you with your marketing of the 2010 corn crop, by focusing on three main points.

1.    Develop a Simplified Business Plan:

Before you attempt to market a single kernel of corn this year you should have an idea of what your cost of production is, as well as identify the return that you expect from your operation. There are numerous sources available in which to help you with this process. For the purposes of marketing your production, keep this process as simple as possible. Reach out to your favorite University, as many have developed these tools. You can also rely on your broker or farm consultant to help you with this process. Your broker is a partner in your operation, just as your banker and your suppliers are partners. They should be there to provide useful tools for your marketing and be able to assist you as you go through the process of identifying your objectives and help you to follow the progress throughout the marketing year.

2.    Get Professional Help:

I am not suggesting that you run to your nearest psychiatrist, although many in this industry could use one at times. Rather, it is important to utilize the professional help that is available to assist you with your marketing. I have discussed this before, but I feel strongly that the inclusion of a professional marketing service is an important component to any successful marketing plan. As of February 1st, the advisors included in the Archer Financial Ag Hedge Program on average have sold nearly 45% of the crop from an average price near $4.30. These services benefit from dedicated research as well as timely execution of advice and can be a solid compliment to your own marketing.

3.    Put a Marketing Plan in Writing:

Once you have indentified your cost of production and your expected return, it is important to put a plan in writing, so that it can be viewed and reviewed as necessary. No plan is expected to be so rigid as to accept no changes. Market conditions are constantly changing in today's global environment. The written plan can reduce the emotion that often accompanies marketing, as some of the decision making has been reduced. As an example, the 25% retracement level for December corn from its January decline would be near $4.03, the 50% retracement level would be near $4.19 and finally the 75% retracement level would be near 4.35. While these are not magical numbers to the trade, they do provide starting points for a 2010 hedge program and they likely also provide attractive returns for a well managed operation. The key is to identify targets so that you are prepared to act when the marketing opportunities arise. 

The marketing help provided above likely seems quite logical and simple. That's because it is. It stands in contrast to the actual complexities and emotions that you may face in marketing your 2010 crop corn. By identifying the profitability levels of your operation, utilizing the resources that professional analysts can provide, as well as having a written plan of action, I believe that some of the stresses and emotions that can be associated with marketing your grain production will be reduced.

Please give me a call if you would like information on cost analysis or additional information on the Archer Financial Services Ag-Hedge Program. I can be reached at 1.800.933.3996 or send me an email to scott.harms@archerfinancials.com.

Futures and options trading involve significant risk of loss and may not be suitable for everyone. Therefore, carefully consider whether such trading is suitable for you in light of your financial condition. The views and opinions expressed in this letter are those of the author and do not reflect the views of ADM Investor Services, Inc. or its staff.  The information provided is designed to assist in your analysis and evaluation of the futures and options markets.  However, any decisions you may make to buy, sell or hold a futures or options position on such research are entirely your own and not in any way deemed to be endorsed by or attributed to ADMIS. Copyright © ADM Investor Services, Inc.

About the Author

Scott Harms was raised on a grain and livestock farm in Forest City, a small town located in Central Illinois. He attended the University of Illinois in Champaign-Urbana where he received his Bachelor of Science Degree in Agricultural Economics in 1989.  Upon graduation Scott moved to Chicago where he began working for Merrill Lynch Futures in their Agricultural Hedging Services area. After 10 years at Merrill Lynch, Scott spent 8 years at Prudential Bache Commodities before joining Archer Financial Services, Inc. in 2008. 

Scott has specialized in grain hedging where he assists both producers and end users achieve their marketing objectives. He currently manages the Agricultural Hedge Marketing Program, which is a unique program that assists grain producers with their marketing. 

Scott J. Harms
Archer Financial Services
Ag Risk Specialist
1.800.933.3996
scott.harms@archerfinancials.com