Farm profits improve dramatically with good marketing plans

By David Bau, University of Minnesota Extension

ST. PAUL, Minn. (4/28/2008) — A proverb in grain marketing states that two-thirds of the grain is sold in the bottom third of the market. I used data collected by the Minnesota Agricultural Statistics Service for corn and soybeans to see if this proverb holds true in Minnesota.

Using the average monthly Minnesota cash prices received for each crop marketing year, the prices received were put into the three different tiers—the top, middle and bottom third of the sales range. I added up what percent of the crop was sold at or below prices in the bottom one-third of the cash prices offered during the year, and also the percentage of the crop sold in the bottom two-thirds of the cash prices received during the crop year.

With corn sales in Minnesota for crop years from 2003 to 2005, 28 percent of the corn was sold in the bottom one-third of the market and 52 percent of the corn was sold in the bottom two-thirds of the market prices offered each crop year. For soybeans, 34 percent of the crop was sold each year in the bottom one-third of the market prices offered, and 69 percent was sold in the bottom two-thirds of the market prices offered.

One factor I found very interesting in the data is that not one month was in the lowest one-third of the price range in all three of the crop years for either corn or soybeans. Prices ranged an average of $1.85 for soybeans from high to low prices over the three crop years. For corn, the average price range was 28 cents between the high and low price. This represents a significant amount of revenue to farmers.

Iowa State University data states the average farmer’s profit is 20 cents per bushel for corn and 30 cents per bushel for soybeans. If farmers were able to sell more of their grain at or above the bottom two-thirds market price level, instead of receiving the bottom one-third average price, this would mean an additional 9 cents per bushel for the 28 percent of the crop sold in the bottom one-third of market prices.

Any use of this article must include the byline or following credit line:
David Bau is an agricultural business management educator with University of Minnesota Extension.

Media Contact: Catherine Dehdashti, U of M Extension (612) 625-0237, ced@umn.edu.

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URL: http:// www.extension.umn.edu/extensionnews/2008/farmmarketingplans.html  This page was updated April 25, 2008 .
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