From the Ground Up - Pre-Selling Corn

For a farmer, marketing the commodities that he grows can be a tricky business. It involves analyzing prices, weather, and then the farmer taking a position based on what he believes is going to happen.
“I haven’t priced any of my corn yet for the fact that I want to get a good stand up to kind of see where we’re at.”

When Jerry Scamardo says he hasn’t priced his corn yet, he means he hasn’t pre-sold the crop.

“When you price corn, you sell bushels per acre, and let’s just use an example, say, I think I’m going to make 100 bushels per acre and I go sell 100 bushels per acre, well at the end of the year if it’s hot and dry and you don’t make that 100 bushels to the acre, you have to come up with whatever bushels you are short, to make up for the bushels that you sold that you do not have to sell.”

And that means finding and buying at the current market price however much it takes to fulfill your contract.

“It’s all a big risk every year when you do pre-sell. Now if you want to wait to the end ‘til you make that crop and you’ve got that corn in a bin, and then sell it after that then you can also go that route.”

But there’s risk on both sides of the coin.

“We generally sell at a point where we think we can make a little money. If you don’t sell, then you’re at the market’s risk at the end, whatever it is, whatever the price is, if you want to sell at that time, or you have to hold it, and sell it at a later point.”

And, no, if you’re wondering, years ago farming wasn’t this complicated.

“It’s not just something you decide to do real quick, you need to put a lot of thought into what you’re doing and kind of look at the markets and take your best guess at what you think was gonna work out best for you price wise. And generally, corn is lower at harvest time, the price of corn is lower at harvest time than it is the other times of the year because it’s all hitting the market at one time and they’ve got a plenty supply.”

So not only does a farmer need to know how to grow his crop, he also needs to know a little about commodity markets and risk management. I’m Kailey Carey, looking at Brazos Valley agriculture, From The Ground Up.

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