5 Ways to improve your marketing in 2024

Every year, I enjoy teaching our Kluis Grain Trading Academy. The students come from all across the United States and Canada. They are primarily farmers, but we attract investors and bankers too. This year we also had several college and high school students. 

Our classes — charting, grain merchandising, and (most important) how to build a marketing plan — change the way our students approach the grain markets. Since starting the academy 12 years ago, many of the students have become longtime customers, and we keep in touch with our alumni.

One of them (an Iowa farmer who was in our first class) called with questions. “What has changed?” he said. “The market plans I made and used five and 10 years ago do not seem to work anymore. These volatile markets are driving me crazy!” 

He is also a long-term friend, and I knew he was successful, so I was immediately concerned. If this successful farmer was having trouble with his marketing plan, then what about the rest of my farmers that I work with? 

I started to ask him a lot of questions. I also emailed him a blank marketing profile form. This simple two-page form details acreage, yield, total production, storage, and so on. This basic info is the foundation of any good marketing plan. I wanted to see how a plan I could build from scratch with his current data and my current rules compared to the plan he built based on what we taught in our classes a decade ago. Had I missed something?

He was apparently as anxious as I was to figure this out. In less than two hours, he emailed me his completed form with very detailed information. My first impression was wow. His acreage had really increased, and he was getting great yields. In fact, his total production was up more than 200% from when I first started to work with him 12 years ago. That was all good news.

But then I found the bad news: He had not sold nearly enough ahead. 

I called him to say how impressed I was that he had really increased his farm size and total production. His cost of production was low and he brought a lot of income to his bottom line. 

Then I brought up selling ahead. He confessed it had been easier to sell a lot ahead when he was younger, because he had (in his words) a “mountain of short-term debt.” However, now he was in a much better cash position. He didn’t have to sell ahead to keep his banker happy. 

He also had built a lot of storage. Without those two pressures to sell, he could — and did — hold almost all his corn and soybeans until after harvest or into the next tax year. 

We’re talking about a lot of grain, a scary amount. “Most days my cash inventory values can change by over $10,000,” he said. Then he spilled out his greatest horror: “In July, when prices crashed, I lost over $100,000 in three days. And I didn’t have any puts.” 

At that point, I felt more like a counselor than a market adviser. He said he felt better just talking about the volatility and the challenge of marketing. I told him that was enough for the day and that I would send him some suggestions. We planned to talk again the next week. 

When I went through my notes from that first call, I had two initial thoughts. The first was that, yes, the grain markets had changed over the past decade. They are definitely more volatile.  

Second, I thought about his “good news, bad news” development over the previous 10 years. The good news was that his debt had gone down, and his ability to store had increased. The bad news was that it took away some of the pressure that had pushed him to stay disciplined in his new-crop marketing decisions.

Here are the five suggestions I composed for him to do a better job in 2024:

1. Know what gives you anxiety. A decade earlier, he was taught to make one or two new-crop sales. However, with his huge increase in production, that would now be big and scary 50,000-bushel sales. Instead, he should make a series of 10% new-crop sales. He knew he would be comfortable making several 10,000-bushel sales instead. 
2. Become your own banker. Even if he didn’t have to sell to keep his bank happy, he still needed to hedge part of his production ahead each year to manage risk and maximize profits. That is what his banker would have pushed him to do. There is nothing wrong with having some cash in a money market account and fewer bushels of grain in the bin. 
3. Leverage that storage. Because he has more storage, he should consider placing some new-crop corn hedges into the March futures contract rather than December. The March corn futures were trading at a 15¢ premium to the December contract. That carrying charge, plus basis appreciation, could make his cash corn worth 30¢ to 40¢ a bushel more for delivery the next year. In most years, he could also place his new-crop soybean hedges out into January and wait for the postharvest basis appreciation to develop. 
4. Learn from that $100,000 nightmare. Stay consistent. Even though the puts he bought in 2022 did not make money in his futures account, the puts that he should have bought in 2023 would have. I know he did not like to lose money on puts, but they are a good marketing tool because of the downside price protection they provide, and the delivery flexibility they give you. Think of puts like fire insurance: You don’t stop paying just because the house didn’t burn down this year. You keep paying to protect yourself for when the fire comes. And with today’s grain markets, you know that fire will come.
5. Form a team. He is fortunate to have the next generation starting to farm with him, which means it was time for him to create a marketing team. The team should work together in making the critical marketing decisions. This will help him keep track of where he was, who had the best basis, and the way to make the best merchandising decisions. Working with a team makes it a lot less scary — and helps prepare the next generation. This recommendation was not well-received; it is hard to shift overnight when you’ve been successful flying solo. I reminded him it would help prepare the next generation, so they could also succeed in the future. He agreed to try it next year with part of the 2024 production. I look forward to hearing his results.

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.