How to start transitioning grain marketing to the next generation

This is a four-part series on transitioning grain marketing responsibilities that will be updated throughout the year.

Part 1:  5 steps to transition the grain sales process

Earlier this year, when the grain markets were tanking, some farmers went into full-blown panic mode. One Tuesday in mid-January, my phone rang. It was one of our Missouri customers.

“I was too busy to make any grain sales when you did the corn and soybean sales right around Thanksgiving,” he said. “Now, corn is down over 60¢ and soybeans have dropped by $2 per bushel. I kept hoping we could get back to those prices, but it just keeps going down every day!”

By now, he seemed pretty stressed. “I need to get someone else involved,” he said. “This is just too scary.”

I felt bad for him. I could feel and hear his frustration. I knew the family well, and they usually followed every sale recommendation. I also knew they were transitioning the farm, and the day-to-day decisions, to the next generation. They worked well together and had consistently harvested good and great yields. However, they struggled with one tough part: grain marketing, and how to transfer it to the hands of the next generation.

They are not alone. Every farm transition plan needs to outline the grain marketing process and how it transfers to younger hands. The plan needs to make clear who makes the calls, how much grain to sell, to whom to sell it, and what the decision-making process is. It also needs a timeline for when those responsibilities start to move to the next generation.

The changeover doesn’t have to happen all at once, but it has to be very, very clear about who does what. You don’t want the awful experience of saying: “I was supposed to make the sale? Oh, I thought you were supposed to make the sale!” Or the opposite: “Oh no, you made a sale too?”

Are you over 50? It’s not too early to start bringing in the next generation. The timeline and the shared responsibilities can be a relief to everyone.

Today, let’s look at the beginning, with the basics you need for your plan and for your future marketing team. If you are transitioning, here are some suggestions that may help:

Stage one: Prepare to share

Once you need to share responsibilities, that is when you need to have a basic marketing plan, and not just one in your head. Now is the time to communicate your plan to the next generation, and write it down. Yes, writing your first marketing plan is a challenge. But take a few months and go step-by-step. You can do it.

A marketing plan details how you turn your crops into money. You think you grow crops, but you really grow money. The key is how to grow more crops and more money.

First, here are some templates you can use to gather the numbers you need. These templates have you fill out one row each time you review your plan. The numbers are for your entire farm.

If you have several farms, consider looking at crop production and the value on each.

Stage two: Time to share

Once you have the basic numbers on paper, assemble the members of the future farm operation. Explain you are building a current marketing plan and it is a work in progress and always will be. Start meeting every week to review the plan and update its numbers.

Assign tasks to each member, starting with these first templates: Check the prices, estimate the yields, update the calculations, and update and print the spreadsheet.

It is good to know whether the market is up or down, but it is more important to know how the changes impact your farm’s bottom line.

These little templates are only the first step, but a huge one. They translate all your work, risk, and effort into dollars, and make you and your team aware of how those dollars change every week and every month.

Establish a routine for your meetings. At the end of each, set the time and date for the next. Make these meetings a priority, even when you are busy with fieldwork. Remember: You grow money. Many years, some of the best opportunities to sell develop right when you are planting.

In the upcoming installments in this series, which will appear in the Your Profit section once a quarter, I will lay out the next steps, with more templates for you to fill out. I will help you lay out your plan for how you can control some of your risk, and how you and the next generation can turn those dollars on paper into money in your farm accounts.

Your marketing plan is not just one and done. As the markets and your production estimates change, you need to modify and update your marketing plan. Have an income goal. Watch the calendar, not the news. Be seasonal sellers, willing to make decisions based on what works for your farm, not on what you read on the internet.

You may find that some of your next generation enjoy some of the marketing tasks you assign them. That would be good news all around. Write to me and tell me how it’s going for your farm, as you transition to the next generation.

Part 2: Track your inventory

I see a real need to help readers learn how to do this right. Transitioning from one generation to the next is not easy. Many callers expressed thanks but also told me how scary it is on both sides: the generation handing over control, and the younger farmers’ very scary burden of stepping into those boots and taking on the burden of responsibility.

Readers also told me that writing out the cash and new crop values each week was worth the time. The process of writing down the numbers helped them realize how important marketing is for their farms, and how big the dollar amount changes are, month-to-month.

Now, what should you do next as you work through your farm transition?

Step one:

Keep going. As I wrote in March, this is not one-and-done; this is a long-term project. Someone on your farm needs to keep track of your cash crop and new crop values weekly. Use those tables I provided in my March column as a template. I also think you should update the worksheet or spreadsheet after a major market move.

Step two:

Add another layer — your inventory. Track the value of what is already in the bin, whether on- or off-farm. 

Here is a table template to use:

Note: The risk of loss in trading futures and/or options is substantial, and each investor and/or trader must consider whether this is a suitable investment. Past performance – whether actual or indicated by simulated historical tests of strategies – is not indicative of future results. Trading advice reflects good-faith judgment at a specific time and is subject to change without notice. There is no guarantee that the advice given will result in profitable trades.