What should you look for in a consultant?
Brown lists “trust” as the most important trait in deciding which consultant to hire. “Find a marketing consultant you trust to implement your plan,” he says. Without trust, “you will be moving from consultant to consultant.”
Kent Thiesse, farm management analyst, MinnStar Bank vice president, Lake Crystal, MN, says farmers must also trust that the consultant will stay within the initially established marketing parameters. “Make sure the consultant will not encourage them to become involved in expensive, high-risk speculative marketing positions that could lead to longer term financial risk for the farming operation,” he says.
Don’t expect a consultant to hit the highs every time. “Find a consultant who’ll take the time to understand your particular situation and develop a marketing plan specific to their situation,” Brown says. “A cookie-cutter approach in developing a marketing plan will not work well in many operations,” Thiesse says.
“A consultant should discuss and develop a strategic plan to market your commodities. I want a consultant who constantly provides me with information about the direction of markets and factors on the horizon that could dramatically shift market direction. At the same time I want someone who provides specific action plans for my operation,” he says.
Thiesse suggests growers have detailed discussions with potential consultants prior to hiring them. “Discuss the development of a grain-marketing plan and timelines for the farm operation and identify marketing strategies that to be used,” he says.
“They should review costs for the consultant’s services and potential grain trades and set up regular times to review and revise the grain marketing strategies,” Thiesse says.
Growers should develop a written list of objectives and expectations they’re looking for in a consultant. “It may almost be similar to a position description for a potential employee,” Thiesse says. “Use that list in finalizing the decision to hire a consultant. Share those objectives and characteristics with the consultant when the agreement is finalized and then to evaluate his effectiveness.”
Cost will vary. Some marketing advisors charge by the bushel; others by the acre. Rates will range from about 5¢/bu. to $5-10/acre. That likely doesn’t include brokerage fees for futures and options trades.
“There are many different arrangements today for marketing consultant services,” Brown says. “A good consultant can pay for himself/herself very quickly. You want to pay enough to get the kind of service you want. A relatively inexpensive consultant will in many cases not give you the personalized attention you’ll need for your operation.”
Thiesse adds that initially, “it’s probably best not to agree to any fees or commitments that are longer than one growing season, or six to 12 months. Growers can then evaluate the effectiveness of the services relative to the costs.
Freedom to make trades. Some growers give consultants the authority to make sales without notifying them first; now that’s trust.
“Market plans can often have specific triggers built into them,” Brown says. In today’s volatile marketplace, the last thing you want is to miss an opportunity to market commodities at a specific trigger because you were not available, he says.
“If you go through the steps in picking a successful marketing consultant, you should have built a relationship that will evolve into one that allows the consultant to take advantage of market opportunities for you,” Brown says.
“A good consultant will have built a plan specific enough for your operation so you know when trades will happen. And, a good marketing consultant will be in contact as markets develop, so there will be no question the response to be taken when specific triggers are met.”
Thiesse says giving a consultant total authority to make marketing decisions, beyond selling at specific market triggers, would be difficult unless they were part of managing the farming business. “They would require knowledge of breakeven costs of production, farm financial commitments and other financial aspects of the farm operation,” Brown says.
“I think most farm operators would like to be involved in final decisions related to grain marketing, then have a consultant to offer professional advice and to carry out the final marketing decisions and strategies,” Brown adds.
Some large producers go so far as to have more than one marketing advisor provide opinions and recommendations before making final marketing decisions.
“If you’re thinking of hiring more than one marketing consultant, you need to ask yourself ‘why,’” Brown urges. “If you purely want to hear what other information is out in the marketplace, then maybe having more than one consultant can work.
“The bottom line is to develop a marketing plan that you can follow. Try not to take certain advice from one consultant and other advice from a different consultant. Doing that will likely lead to choices being made that you will question in hindsight.”
Thiesse says growers should notify their ag banker if they’re using a consultant, “especially if marketing strategies that could require short-term credit availability, such as hedging.”
He adds that growers should understand what marketing strategies will cost when using futures, options and other marketing tools, “even if they have a marketing consultant to assist with those decisions and strategies,” he says.