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Crop Marketing Strategies


Hi I’m Steve Johnson farm and ag business management
specialist, Iowa State University Extension and Outreach. Let’s take a look at crop marketing
strategies. What we’d like to feature today is a
crop marketing matrix. The matrix is dependent upon your view of futures prices. So the expected change
in futures or the expected change in basis. Will futures go up or down? Will basis weaken or strengthen? Depending on your expected change pick the marketing tool that best fits. Is the marketing tool to take advantage
of futures prices that will later increase
but that basis will weaken. Contract such as a
basis contract, sell cash bushels and buy futures or
sell cash bushels and buy a call option, or perhaps a
minimum price contract through an elevator, a co-op or another grain merchandiser would be an
opportunity to take advantage with unexpected change higher futures
and a weaker basis. If you think futures prices are going to
decline and the basis will weaken make a cash sale now or a forward
contract. If you think the futures prices will
decline but the basis strengthen, we can use
tools such as a hedge or a non-roll hedge to arrive or buy a put option. In other words we’re locking in the futures price but not
necessarily the cash price or the basis. And if you
think that we’re going to see a futures price
increase but a strengthening basis perhaps you store and wait, or delayed price contract, or a minimum price contract. Your crop
marketing strategies are combined with your understanding of
marketing tools and the importance of having a crop
marketing plan. I’m Steve Johnson farm and ag business
management specialist, Iowa State University Extension and
Outreach.

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