Before a single corn or soybean plant pushed out of the ground this spring, the grain it will produce on David Ahlers' farm was already sold. He has already sold his 2000 corn crop, too.
"I started selling this year's crop in the spring of 1998," says this Flandreau, SD, farmer. "I usually sell one to two years ahead. I know what my costs are, and when I hit my price targets I sell on straight forward contracts."
Those price points are $2.40 for corn and $6 for soybeans.
"My 1999 corn crop is sold at $2.42 and the soybeans at $6.10," he says. "Next year's corn crop is sold at $2.43, but so far I haven't sold any beans. It's going to be difficult to get $6. I may end up selling at $5.75 and then work the market with calls to get the other quarter."
In the 10 years that he's farmed, Ahlers has never sold corn for more than $2.60 or beans for more than $6.40. But his average selling prices have been $2.47 and $6.24.
"I get paid awfully well at those prices," he says.
Call options and crop insurance protect Ahlers from a financial disaster if his crop comes up short.
"With CRC (crop revenue coverage) and call options, it's pretty hard to lose money," he says. "I hang onto the calls until I'm absolutely sure I've got a crop."
It takes discipline to be a good marketer, according to Ahlers. "You have to be willing to sell and forget about going for the highest price," he says. "If you aren't good at marketing it really pays to have somebody do it for you."
While he does his own marketing, Ahlers is quick to credit grain merchandiser Norene Doyle, who works at Cargill's Pipestone, MN, office, for helping him develop his strategy.
"David is unique in that he doesn't hesitate to lock in bushels and he doesn't look back," Doyle says. "We've been fortunate the last few years to take advantage of price opportunities. If we hit the target we sell some bushels and look to scale up. If the market doesn't get there, we adjust.
"Usually, we sell grain about four times to complete the crop. The secret is to have a plan with reasonable goals and then use it. Too many farmers let their emotions come in when the market starts to move."
Ahlers' marketing plan produces a cash flow that bankers love to see. "It has helped me expand," he says. "It makes a big difference when you can show your banker a positive cash flow."
He's increased the 1,500 corn and soybean acres that he started with a decade ago to 11,500 acres in 1999.