If Grain Markets Are Topping, Start Locking In Profits
During 2008, grain markets were almost as high as they are now, however, many farmers were not able to take advantage of these prices either through already having their crop sold or through inaction by the farmers.
I don’t know how many times I have heard a farmer in my office or out in the field tell me “I will sell my crop when it reaches $5 a bushel (or some other round number). As you can guess, it usually reaches $4.95 and then turns around and drops to $3 a bushel where the farmer will then sell the crop to pay for next year’s inputs.
Make sure this does not happen to you. Right now any grain crop farmer should be able to lock in profits for this year, probably next year and maybe even the year after. Make sure to review your cash flow projections and if you have not locked in any profits, at least consider locking in all of your input costs. If you still want to participate in any upward major moves, you can purchase call options on your crop. There are several services that can help you with this.
Try not to be the $5 / $3 farmer this season.
Paul Neiffer is a certified public accountant and business advisor specializing in income taxation, accounting services, and succession planning for farmers and agribusiness processors. Paul is a principal with CliftonLarsonAllen in Walla Walla, Washington, as well as a regular speaker at national conferences and contributor at agweb.com. Raised on a farm in central Washington, he has been immersed in the ag industry his entire life, including the last 30 years professionally. Paul and his wife purchase an 180 acre ranch in 2016 and enjoy keeping it full of animals.
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