Future grain marketers of America

Successful farming in 2023 hinges more on marketing that in past decades, and farmer training is adapting to prepare the next generation.

"Thirty years ago, your best farmers were your best agronomists," says Chad Hart, Iowa State University Extension economist. "When I look at who are the better farmers today, the farmers that are growing today, they tend to be your better marketers.

"The technology allows everybody to do quite well agronomically, so where farmers separate themselves from the pack does tend to be on the marketing side," he adds.

Why the Shift?

Joe Barker, senior director of commodity brokerage at CHS Hedging, says a decade ago, the trading range for corn or soybeans was roughly 60¢ over the course of a marketing year. In recent years the market has seen swings as great at $3.

With that much volatility in the market, marketing well has become imperative, he says.

"Farming is no longer something that you can get close and still make money," says Sean O'Toole, director of commodity brokerage at CHS Hedging. "You have to buy you inputs correctly and you have to sell your crop or your livestock correctly to make money. The prices have never been higher, but they’ve never been higher for inputs and outputs.”

Al Kluis, managing director of Kluis Commodity Advisors, says South American weather, U.S.-China relations, and hedge fund trading are among the many more factors that influence commodities today and lead to large price swings. 

A lot is at stake. Kluis says farmers have the potential to double their profit margin through better marketing of their grain.

Bridging the Gap

Kluis has been advising farmers for nearly 50 years, and over the years has noticed most of his clients never received a comprehensive education on how futures markets work and why they matter to the average farmer. 

In 2012 he started the Kluis Grain Trading Academy to help bridge the gap. The academy is a grain marketing 101 course consisting of six lessons and five review sessions. The course starts with basic concepts and vocabulary and works up to helping farmers build a full grain marketing plan. 

“If you don’t understand marketing, it can become very confusing and frustrating,” Kluis says. “Once you have learned some of the concepts and start taking control, you don’t feel like you’re a victim of the board of trade.”

Kluis is not alone. A myriad of resources has cropped up over the years from brokers, grain buyers, and Extension specialists. 

“There is a gap in terms of the average farmer’s understand-ing of what tools are available and having comfort using those tools so that’s the reason we do this,” says David Brock, principle of Brock Associates, which hosts Commodity Classroom, a two-day in-person crash course on grain marketing. 

Equipping the Next Generation

Many young farmers today learn about grain marketing in college, but even how those classes are taught has been changing.

“We’re all recognizing the same issue and trying to help our students have more hands-on experience here within the college framework,” says Hart. 

Hart says college professors often look for ways to incorporate experiential learning into the classroom to help the subject matter click with students. About a decade ago, North Dakota State University (NDSU) opened a trading room equipped with 32 workstations and access to data and software used by professional traders to model trading in real time. 

Frayne Olson, crops economist and marketing specialist with NDSU Extension, says students use the lab for a variety of exercises including coming up with trading strategies for hypothetical scenarios from the point of view of a farm man-ager, a grain buyer, a speculator, and more. He says it has been “exceptionally effective.” 

“The core concepts haven’t changed, but how we do it and the principles you need to do your job have changed dramatically,” he says. 

Brian Sancewich, assistant professor of agricultural business at Fort Hays State University in Hays, Kansas, says he’d like to see more intentional engagement in the classroom. Students can establish their goals and professors can help them connect the dots on how understanding futures markets can help them achieve those goals 

“When that student walks in, they may not know what questions to ask,” he says. “They may not know what the application looks like. But if you are able to ask that student what their interests are professionally, as well as their agricultural background, then you can start piecing it together and helping them tell the story with what’s going on in the markets.” 

Outside the Classroom

Even with curriculum and tactical improvements, experts agree what students can learn in college is just the starting point.

Hart says continuing education is important because many more tools and special contracts are available today, and farmers will want to understand them before utilizing them. 

“Ag marketing is not something you learn about in class one day and then you know how to do it for the rest of your life,” he says. “As techniques and approaches change, you have to continue to learn and evolve with them.” 

Furthermore, O’Toole says the concepts learned in school may not click until you are using them in the real world. 

“There’s no education that’s any better than being on the farm and having all of the events of farming and marketing occurring around you,” says O’Toole. “It’s so hard to replicate in a college setting.” 

Post-grad education can step in and provide a refresher or build on the foundation, he adds. 

Jerry Paumen, a farmer from Plato, Minnesota, says when his son graduates from a two-year agricultural program, he intends to send him to the Kluis Grain Trading Academy. He says what his son will learn at school is introductory and that’s OK because it’s more important for the school to prepare his son to grow a great crop. 

“It’s great if you’re a great marketer, but if you don’t have anything to market you still aren’t a good marketer,” he says. “We need to grow the crops and that should be our specialty.” 

Paumen was a part of the inaugural Grain Trading Academy class. He retook the class a year later with his wife, Steph Paumen. 

“That way our whole operation could understand and come up with a plan,” he says. 

With Steph up to speed on the strategies being employed, she says she felt comfortable making sales when her husband was in the field. 

Now they are working on slowly bringing their son into the marketing side of the business. 

Family Business

In addition to the complexity of grain marketing, Brock says education is needed because the next generation is rarely exposed to marketing as early as they are to other aspects of farming.

“You’re not talking to 10-year-old Billy about whether or not you should be buying puts, selling calls, or shorting futures in the same way you talk about agronomics and equipment,” Brock says. 

Paumen admits it is a challenge. 

“We do bring [our son] in slowly,” he says. “But it isn’t like you can just open up your books and say here’s what we do and how we do it, because they don’t have that background.” 

He adds he wants him to go into his education with an open mind unclouded by knowing his family’s approach to grain marketing so he can come home with new ideas. 

Kluis recommends training kids as early as their senior year of high school if they intend to work on the family farm. 

He encourages parents and older teens to take his course together and for parents to give young adults an opportunity to manage the marketing for one or two contracts of corn or soybeans to get their feet wet. 

“Ideally you would have some of these concepts and understand charting and options and grain merchandising before you planted your first row of corn,” he says.

Opportunities Through FFA

At the high school level, agricultural education curriculums vary widely across the country, and opportunities to learn about grain marketing and futures markets may be limited.

National FFA Organization is providing teachers and students with the resources to learn about grain marketing and the career opportunities available. 

• Proficiencies: Through the Agricultural Services category, students may be rewarded for work they do on a supervised agricultural experience such as interning with a commodity brokerage. 
• AgExplorer: National FFA recently relaunched its AgExplorer website, which includes a quiz to determine what jobs in agriculture may be a good fit for a student. The site also has information on more than 320 careers in agriculture and resources for teachers. Learn more at agexplorer.ffa.org.