(How not to) bet the farm

by Lisa Graham-Peterson, CHS Staff Writer

Aug 03, 2017

“You can raise the biggest crop ever, but if you don’t know how to market, it doesn’t matter a bit,” says Kyle Schomers. The Iowa corn and soybean grower says one of the most important tasks on the farm is also the hardest: marketing.
A third-generation producer, Schomers farms with his dad and uncle near Harlan in western Iowa’s Shelby County. He was working in Des Moines after college graduation when he got an unexpected opportunity to return to the family farm as a partner. That was 10 years ago. Today, the partners consider marketing part of his responsibility. “But I look to my dad and uncle quite often for their years of experience,” he says.

Schomers also looks to Bill Haupts and Kent Beadle with Russell Consulting Group for insights on the markets and recommendations on the optimal mix of programs for the operation.

“No one is right 100 percent of the time,” says Schomers, adding that was one reason he agreed with Haupts’ recommendation to participate in the CHS Pro Advantage program. The managed futures program, now heading into its third year of contracting, gives growers a simple, seamless way to take advantage of the commodity pricing expertise at Russell Consulting Group and CHS Hedging.

“This was a good way to diversify our marketing without using so much capital for multiple board positions,” says Schomers. “We put about half our bushels in CHS Pro Advantage contracts the first two years it was offered.”

“It takes a lot of money to farm today,” says Haupts, a Russell Consulting Group associate and veteran in farm financial advising. “You can tie up a lot of money with hedge accounts. With this program, there’s no upfront cost, no money tied up.”

Tool to Spread Risk

A recent Farm Credit Services of America survey found the average producer uses four to five marketing tools every year. Although the vast majority still store some crops, growers are using a wider variety of programs and contracts than ever before. With year after year of volatile markets and a global 24/7 marketplace, it’s no surprise they are looking to programs like CHS Pro Advantage as part of their marketing toolkit for a portion of their bushels.

Grower interest in the program remains high, despite varied results. “Corn didn’t do as well as we hoped the first year,” says Schomers. “But other companies didn’t do any better. And we didn’t do so well on our own, either.”

“Last year, our soybean price was excellent relative to our competitors,” notes Kent Beadle, director of risk consulting services for CHS Hedging and Russell Consulting Group. “It was a difficult year to market corn, but our price was still a dime above the average of our competitors.”

“When choosing your marketing tools, it’s about doing something to grab the gross dollars,” says Haupts. “But no one hits the high consistently, so you need a diversity tool to spread your risk around. CHS Pro Advantage is one tool that can give farmers a little added market discipline around that.” 

“Marketing is emotional. It’s a rollercoaster ride,” says Schomers. “One minute you’re thinking you’ve got a good price; the next you’re wondering if it’s going to rain. My dad remembers it was a big deal when the market moved a couple of cents — now it can jump 50 cents within a few days. With CHS Pro Advantage, the markets are still a rollercoaster, but you get to watch it, instead of feeling every dip in the ride.”

Check out the full C Magazine with this article and more.

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