When it comes to grain marketing understanding futures markets and basis can help make sense of the messages that markets are sending.
Crops Extension Specialist Mike Brown says there are a number of factors that can influence the price you receive.
"The most important thing that's going to come to producers mind is understanding where those cash flow requirements are going to be needed. As grains getting put into the bin if there are bills to be paid you may have to sell that grain in spot prices. Maybe not as lucrative as futures contracting on some aspects, but if it has to be done, it has to be done."
He says when it comes to marketing international, national, provincial and municipal events can influence prices on various commodities.
Another key aspect is monitoring futures and basis.
Brown says if the basis is narrow it means that the cash price is close to that futures price, and if its wide your cash price is further away from that futures price.
"With a narrower basis for example, that can basically be seen as the market wanting your commodity, as demand is starting to outweigh supply. On a wider basis it can be a sign that supplies are now outweighing demand, and the market's not very interested in purchasing your commodity right now. So it might be a signal to store your grain if possible."
Depending on how far under or over the basis is compared to the futures market price. can determine whether or not it is worth it to market your crop.
He adds when it comes to building a successful marketing plan there are six key elements.
1 - Production and Production Risk: Choose crops that have the greatest income potential within the crop rotation used and understand the risk associated with growing that crop.
2 - Market Analysis: Gather all information needed to make an informed and rational decision. Closely monitor the market and time grain sales for when prices are advantageous.
3 - Financial Position: Understand production costs and farm cash flow needs.
4 - Marketing Strategies: Reduce risk of falling prices by using grain contracts and by managing storage.
5 - Actions and Timelines: Identify target prices, sales tools, decision triggers and establish a timeline and key responsibilities for implementing the plan.
6 - Evaluation: Grain marketing is an ongoing activity; review the marketing strategy at least yearly.
Brown says its always important to review your marketing plan yearly.
Good market information should be unbiased, balanced and independent.
It should reflect the views of all market players (I.e., buyers, sellers, grain companies and farmers), and good market information should be backed up by facts and statistics.