Your Cost of Production for Next Years Crop

by Dakota Olson

by Dakota Olson

If you’ve had a chance to speak with a member of the ProEdge team lately, one of the most popular questions they may have been asking is “do you have a good idea of what your costs of production look like for this next year’s crop?”  This question may be one of the most important questions to reflect on throughout the year, before and after the crop is produced.  If we truly know what our costs of production are, we can make educated decisions on when and how to sell our crops.  I just want to take a moment to tag on to what my peers have been talking about over the past few weeks.

Kelby mentioned a couple of weeks ago that we are in a time of very low volatility where the futures nor basis values are moving very much. He also warned us to not get in the sleepy mode while the markets are in their current lull and maybe miss out on an opportunity if it arises.  If you have paid any attention to the grain markets at all over the past few weeks, you know that they have been pretty lackluster and boring for lack of a better term.  A four cent trading range during one session is nothing to get very excited about.

The funds are no longer holding their record large short position, something we have been thinking would give us a little steam if the markets gave us a certain spark.  Export business hasn’t been anything great enough to write home about, and the outside markets are still showing negative effects.  Now we are keeping our attention on the current crop coming out of South America and the weather that may affect our crop as it goes into the ground in the next couple of months.

Even if we have a grasp of our current “costs of production,” we also need to be cognoscente of them changing when we lock in fertilizer, chemical, or even fuel.  It is essential to keep this number up to date – all throughout the year.  Here we are a couple of months away from planting season and eight short months away from taking the crop out of the ground.  Are we a regular forward seller of our grain?  If so, do we have our average percentage of next year’s crop already sold?  If not, can we lock in $4 December 2016 futures as a place to start marketing our 2016 crop?  If this can be a profitable sale for our operation, what are we waiting for?  Do we have offers in place, just waiting for the markets to do their job? With the current times we are experiencing it is going to be very important to manage our risk and make some sales when the time is right.  We are here to help you make those decisions and take some of the emotion out of the equation.

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We continue to look for new opportunities to help our patrons succeed.  CVA is very fortunate to be able to offer different levels of service to help with risk management.  The newest addition to the service line-up is an offering of crop insurance knowledge.  We know that crop insurance is not where we hold all of our expertise, and that is why we have teamed up with The Home Agency, a company who will offer crop insurance to our patrons.  The Home Agency’s approach is to tie grain marketing into their crop insurance discussion – both vital parts to risk management in our operations.

The Home Agency will be holding some meetings throughout CVA’s territory to answer questions and provide some perspective on new tools and features available this year.  They are here to give us a greater understanding of crop insurance coverage which will allow us to make better decisions for our operations.  If you have any questions or would like to meet with an agent, please contact your local ProEdge Grain Specialist or Risk Management Consultant.