The Farmer’s Grain Marketing Decision Aid helps you pick a market strategy to match your predictions for futures price and basis movement

Growers market grain using cash sales, hedges, basis, targets, calls, puts and even a combination of these strategies. While most growers probably know the basics of how each of these tools work, the key to successfully using and profiting from these sales alternatives is to know which is the best choice at any given time. The Farmer’s Grain Marketing Decision Aid helps you understand which marketing strategy is your best choice given the specific market conditions at the time.

Carl German, extension crops marketing specialist with the University of Delaware, found growers were often using the wrong marketing alternative for the market trends at the time they were selling their production. He felt growers needed an easy-to-use tool to help them sort out which sales methods are appropriate for the market conditions that exist at the time they are making their marketing decisions and to help them in timing their sales decisions.

Linda Smith, executive editor of Top Producer, reports: “Farmers would go to seminars and learn about marketing alternatives. They realized they should be using these tools and would leave the seminars fully intending to try them. But then they don’t because they are uncertain which strategy they should be using. Farmers needed a way to narrow the number of choices.”

That’s why German and Smith collaborated to create the Decision Aid.

Growers have good access to both futures prices and basis values, and growers already use futures and basis as indicators for making grain marketing decisions. The Aid simply asks farmers to decide if futures prices are trending up or down and if they feel the basis is strengthening or weakening.

Different tools for each scenario

Four possible scenarios result from the perceived futures and basis trends:

—Futures prices trending up, basis weakening

—Futures prices trending up, basis strengthening

—Futures prices trending down, basis strengthening

—Futures prices trending down, basis weakening

Different marketing tools should be used in each of these different scenarios.

Smith created a futures trend and basis trend chart that is divided into four quadrants representing the four possible forecast scenarios. In each quadrant, German listed the appropriate sales tools a grower should consider given his market outlook.

As well, each sales method is color coded to tell the farmer if that particular strategy will reduce price risk, reduce basis risk, or is a strategy for price speculation.

Finally, the Internet-based Aid allows a farmer to click on each strategy, opening a window that provides a quick description of that tool. Clicking on the “futures price trends,” for example, opens links to a number of commodity traders. A farmer can use these contacts to get additional information to assist in price trend analysis.

According to German: “This is a simple tool which directs one’s attention to the specific marketing strategies to consider when you have a certain set of pricing conditions to deal with. It highlights 20 marketing alternatives that can be used in making sales decisions.

“There are no absolutes in marketing and trends can change quickly. So a grower needs to follow the underlying futures prices, price trends, basis levels, recognize volatility in the market, and have access to good technical analysis and fundamentals. This information is widely available through sources such as DTN. Once the grower has decided what the trends are, the Decision Aid is a simple and easy to use tool to select the best market strategy.”

German and Smith have no way of knowing how many farmers have used or are using the Aid as it is openly available on the Internet at www.webixi.com/grainguide/However, both German and Smith have been contacted by producers who have used the Decision Aid and who are very positive about the tool.

Gerald Pilger farms near Ohaton, Alta.

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