Fine Tuning your Farm Marketing Plan

Al Kluis’ three-step marketing plan has been a backbone for many farmers throughout the U.S. over the last decade. However, despite being a source of success regardless of bull or bear years, Kluis says any three-step plan can go for a fine-tuning, particularly after 2021 and 2022 proved the plan to be not as successful as years prior.

The basic plan is as follows:

1. Buy the right Revenue Protection (RP) crop insurance policy.
2. Get 50% to 80% of your insured bushels hedged or forward-contracted ahead of any spring or summer weather-scare rally.
3. Get the new-crop bushels that are not protected with hedges protected with put options, if the puts allow you to lock in a profit.

So what happened these last two years that made this plan not as surefire? Both years’ prices were higher in February and did not drop significantly lower into harvest lows. Therefore, new-crop hedges were at or slightly in the money, while puts were of little value or ended worthless. However, it was okay for your bottom line, given corn and soybeans’ prices.

But, Kluis reminds us that money spent on RP crop insurance – just like life insurance – is never money wasted. As at the end of the day, you’d rather not collect on it.

Read more on farm marketing plans here.