Manage farm production risk using marketing alternatives
Farms 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.
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.