Is Your Grain Merchandising Plan In a 4-Alarm Emergency or Fire Drill?

BrickWallWhen was the last time you actually walked through your merchandising plan? In the midst of the lackadaisical pricing environment of this past spring, did you stay on top of things, or did you figure that, since you weren’t busy with merchandising grain, everyone else must be in the same boat so nothing has changed?

Unfortunately, if you can relate to the preceding scenario, you may have had a rude awakening last week during the biggest rally of the year up to this point. Did you get to the elevator last Friday, assuming the world was the same as the day before, only to find out that when the alarms went off and you rushed down the stairwell to get out that your exit had changed, or even disappeared all together? The exit I’m referring to is of course the basis.

Grain merchandising 101 says that the basis is higher when no one is selling, and is lower when there is lots of selling. I think it’s safe to say that there was lots of selling going on last week. Were you able to stay on top of things basis wise? Were the users you thought you could sell to still willing buyers by the end of last Friday, for the delivery slots your logistics dictated and for the basis level you thought you could sell? Maybe if you were fortunate all these pieces remained constant, but for most out there they changed, and in some instances they disappeared altogether.

How about the other side of the coin; did you have producer target orders fill at what ended up being a basis that was too high? Did such targets, some of which may have been draped in cobwebs from being in there so long, put you in the middle of a cost/price squeeze? How does this affect your merchandising plans going forward? Will you be able to recapture those margins heading into this time of two harvests coming together this summer?

Three months worth of change happened in less than a week for some folks. If you weren’t one of them, I applaud your planning and persistence in managing this environment; that, or you’re extremely lucky.  If what I described sounds like a conversation you’ve had with yourself lately, what are you going to do about it?

This is a matter of choosing to be proactive instead of reactive, working through your contingency plan before the fire erupts and you are forced out of the building; are your routes clear, are they still where you thought they were?