With the added chore of luring investors to regional biodiesel plants while tending to over 3,500 acres of corn and soybeans, Chuck Dunlop doesn't have time for one of the farm's most important functions: marketing.

But he doesn't trust that chore to a service only interested in a commission. He counts on a 10-plus-year relationship with a marketing consulting service to get that job done — and at a profit that far outweighs their $4-5/acre fee.

Dunlop, who farms his family's operation in eastern Kansas near Parker, leaves the marketing to the experts; people who keep their eyes on the pulse of market trends 24/7.

He works with Hurley & Associates, Inc., which has clients in a dozen or more states. “My consultant (Bill Bullard, Charleston, MO) is a live wire,” says Dunlop. “I can worry about farming and not about the best time to market.”

Bob Wisner, Iowa State University retired grain marketing specialist says, “If you are looking for help in timing marketing decisions, or for an outside party to help you pull the marketing trigger, an advisory service may be helpful.

“But be realistic about what to expect from an advisory firm. Don't expect it to enable you to consistently sell your crops or livestock at the highest price of the year,” he says. “Most advisory services have as their objective a more realistic goal of recommending sales at above-average prices and at prices that will be profitable for your farm business.”

So if a consulting firm “guarantees” you'll be in the top 10% of the market if you sign on with them, say “no sale.”

“Look for a consulting service with a good track record, a good company history and solid experience,” says Richard Brock, president of Brock Associates, a consulting service in Milwaukee, WI.

Dunlop, part of a grower co-op raising financing for two regional biodiesel plants in southwest and north-central Missouri, previously sold crops only after they were harvested. No forward contracts. No futures. No options. No early season profits.

“Before going with the service in 1996, we didn't sell until it was on the truck,” says Dunlop. “We sometimes lost money by not selling early.”

He admits that even when corn hit $5/bu. in the mid-1990s, few if any sales were made. “That's when I decided I needed help with marketing,” he says.

The consulting service helped him analyze crop inputs and develop a breakeven needed for corn, beans and other crops. A scale-up sales program was established, using forward contracts, futures and options.

HURLEY & ASSOCIATES had the qualities Dunlop sought. Since his Kansas region sometimes faces yield shortages, smaller 30-40% sales are usually made early. Unsold projected yields are often covered by put options to set a floor and leave the upside open.

Producers should select a marketing consultant with a similar mindset and approach to marketing as their own, says Ed Usset, University of Minnesota grain marketing specialist. “Find someone who can market your grain in a style that makes sense to you,” he says.

Iowa's Wisner advises to look for a service that can handle your needs, large and small. “A few advisory services are available to offer clients a ‘managed-marketing’ program,” he says. “With this service, the advisory firm takes over the entire marketing job for the farmer.

“If you use such services, have a written contract and carefully read the contract details so that you fully understand your obligations and the obligations, responsibilities and limits of liabilities of the market advisory service.

“Some market advisory firms also are affiliated with commodity brokerage firms. In that case, they can refer you directly to brokers from their organization if you are managing your own marketing program and decide to use futures or options markets,” says Wisner.

USSET ENCOURAGES growers to examine a service's record, and even see if it can top your local average crop price. “You can track a baseline price of cash grain prices in your local market for every crop year,” he says. “See if your paid consultant can beat that average. No one can beat the average every year, but if your guy falls short two or three years in a row, it's time to find another consultant.

“And don't forget to take into consideration their transaction costs and marketing fees. I think the price used to compare to a baseline price should be net of transaction costs and marketing fees,” says Usset. Ask yourself what you earned before or after transaction costs and marketing fees.

Ask plenty of questions, adds Alan Kluis, president of Northland Commodities consulting service, Minneapolis, MN. “Find out the service's strategy or approach to the market,” he says.

“It should be clear and easy to understand. Check the track record for the last three years, the consultant's game plan and how the service will execute on that plan. Also, find out who is on the team you work with. Even ask how long the consultant plans to work with this company and, if he or she is gone, who is the backup contact?”

Depending on the advisor, transaction costs and marketing fees might be 5-35¢/bu./year, says Usset. A typical per-acre fee may range from $4.50 to $5/acre where high yields are typical. It may be $3/acre in areas where yields are shorter. Fees will likely be negotiable, depending on the extent of services contracted in a plan.

Wisner recommends that growers enhance their marketing skills before hiring a consulting service. “You likely will need a solid understanding of marketing procedures such as hedging, various types of elevator and packer forward contracts and use of options markets,” he says. “Some understanding of commodity charting and technical analysis is helpful.”

Usset agrees. “Hiring a marketing consultant isn't an excuse for ignorance of market issues, marketing tools and general market trends,” he adds. “You should expect your consultant to be able to explain the strategy in place, share some specifics on price objectives and timing and to explain the downside of the strategy in place.

“You should be able to understand every detail. Let them do their work. That's why you pay them. But know what's going on in the marketing of your crop,” advises Usset.

For further information on marketing consultant performance, the University of Illinois farmdoc program regularly charts the performance of marketing services, available at www.farmdoc.uiuc.edu/agmas/index.asp.

WHAT A CONSULTING SERVICE EXPECTS

First, don't look for a home run on every sale, just a reasonable profit that fits into your farm's production and overall management program.

Jason Moss, Brock Associates marketing consultant, says nothing beats reasonable expectations. “People who expect an average selling price in the upper 10% of the season's price range or lock in a floor price with too thin a budget for today's margin requirements have unreasonable expectations. Thus, they would make poor clients,” he says.

“Similarly, those who underscore the credibility of a long-term track record when signing up, but assess results on a short-term basis, have a disconnected approach to evaluation,” he says.

Alan Kluis, Northland Commodities, says consultants quickly learn who in the operation makes the marketing decisions.

“If it's done by committee or someone who gets the most upset, it will not work,” he points out. “Quite often women make better decisions than men. They think of it as money. The ego/bragging factor is not as big.”