Manage farm production risk using marketing alternatives
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EmailFarms that produce cash crops may benefit from a formal commodity marketing plan that covers production costs.
Corn production costs have continued to increase and are now being estimated at about $595 per acre based on the Michigan State University Extension 2013 Crop Budget Simulation template. It is important for farms to have a plan in place that will allow for a system to generate the income necessary to cover these expenses. Farms need to consider the real potential that the December 2013 corn price is now projected to be more than $2.00 per bushel lower than the price received in 2012. Farms will need to have strategies in place to control or cut some of these projected costs in the event that we do not have a great growing season. Many farms are using a combination of marketing alternatives to manage some of the price risk attached to farm commodities.
One tool that is available to Thumb area farms is the opportunity to take advantage of a bi-monthly Commodity Marketing Update meeting that is held at the Sanilac County Michigan State University Extension office at 37 Austin Street, Sandusky, Michigan. The next meeting is scheduled for Tuesday, April 30 from 10 a.m. to noon. For farms that cannot attend the meeting in person the Extension team is making arrangements for a special web feed that will allow you to take part in the actual meeting from your home computer. This webinar option is planned to be available but you are asked send your computer connection request to Dennis Stein at steind@anr.msu.edu to make arrangements and get the link location.
During times of market volatility farms may want to consider using a combination of marketing alternatives like forward price contracts, futures contracts and option contracts as part of the farms overall marketing plan. Considering all the marketing alternatives is one method to control some of the price risk in your farm’s marketing plan. The Commodity Marketing Update meeting presenters will do their best to cover some of the marketing alternatives that farms may want to currently consider.
