These circumstances serve as a good reminder that there is a farm marketing alternative available to farmers that can take away the downside risk – that being the Minimum Price Contract. With this contract, the farmer sets a floor price on his grain so he never takes less than the stated price but remains open to the possibility of more if prices increase.
Consider if, while they were planting their corn last spring, farmers had entered into a Minimum Price Contract with the local elevator. Imagine how different they would feel today?
So, why didn’t farmers jump on the Minimum Price bandwagon? I think they are a marketing tool that was simply forgotten about. As prices moved higher and the cost of MPC increased, farmers and elevators disregarded them as a viable farm marketing alternative … and, honestly, with so much profit sitting on the table they weren’t really needed. However, now with prices taking such a down turn it may be time to bring them back into the marketing discussion.
Farmers are faced with the likelihood of lower prices this fall, but there is also the likelihood of much bigger yields to go along with it. When you factor in higher yields, there is still profit for many farmers to protect at today’s new crop prices. The Minimum Price Contract is the way for the producer to guard against further price declines and certainly worth consideration.
Topics: Farmer Marketing