By:  Joleen C. Hadrich and C. Robert Holcomb

Farm managers recognize the importance of having a marketing plan to improve their profitability.  And, the title of Ed Usset’s grain marketing book conveys an important truth- “Grain Marketing is Simple-it’s just not easy!”  In the “Top Farmer”[1] survey, crop producers were asked to categorize the percent of their crop marketed across 3 general categories: pre-harvest contracts (cash contracts, futures, and options), post-harvest contracts (cash contracts, futures, and options) and cash sales (harvest and post-harvest).

In order to compare the highest and lowest performing farms, farm profit performance was measured using an adjusted net farm income ratio[2].  Comparison across performance levels was completed for the “Top Farmers” who were in the highest 20% of financial performance, measured by the adjusted NFI ratio, compared to the lowest 20% of farmers.  In 2016, regardless of whether you were in the highest or the lowest 20% of producers, approximately 34-35% of the overall crop was sold using pre-harvest contracts, futures, or options while another 36-37% was sold through harvest or post-harvest cash sales.  The main difference in marketing between these two groups occurred with post-harvest contracts.  The highest performing farms contract approximately 29% of their crop using some combination of post-harvest cash contracts, futures, and options.  The lowest performing farms only contracted 22-23% of their crop with post-harvest contracts, futures, and/or options.  [Read more…]