Decision Matrix For Grain Selling & Solutions
A profitable farm requires strong marketing abilities, and using a decision grid can aid in crop marketing decisions. The best way to keep knowledgeable is to make wise judgments about crop marketing. The correct method of decisions about crop marketing is to be updated. When you have a marketing strategy with achievable profit goals, you can take advantage of new marketing opportunities as they present themselves.
In improving your grain marketing, a producer might choose to promote their harvests in numerous ways. As a result, creating a crop marketing plan is crucial to controlling the overall business risk of a farm. Understanding the procedures and alternatives may help farmers choose the crops they will cultivate, the marketing strategies they will use, the timing of setting pricing objectives, and the methods for calculating profitability.
Why employ a decision grid?
Farmers now have more options than ever for marketing and pricing. Should they set their pricing for quick delivery at the bid price? Hedge? Futures contract? Secure a basis? There are options available; when utilized effectively, they can aid in managing price risk. Farmers must understand when and how to apply each, though.
For grain marketing, there are several options for price and delivery. To make wise crop marketing choices, farmers must evaluate all of these marketing options. When planning marketing decisions concerning harvest and disposal, where you have complete knowledge of the crop still maturing in the field, and there is still ambiguity about yield, quantity, and grade, marketing options, and signals may differ.
Every crop that uses futures markets to determine the price can employ this marketing decision-making method.
What does a decision grid do?
The decision grid aids marketers in price analysis and helps them predict what will happen in the basis and futures markets. When a futures price exceeds expectations for the current situation, it is said to be strong. A poor basis indicates that the cash price is low than the futures market. However, business analysts and stakeholders can use a decision matrix more objectively and assess their alternatives. Decision grids (or matrixes) can:
- Eliminate decision fatigue.
- Make decisions with less subjectivity.
- Specify and rank your selections.
If you’re making a market decision, you make a decision matrix to determine the best futures price is a sign to action, but to hold off until a better basis develops. Selling delayed futures and storing grain is one method to do this. A second approach is to purchase a put option, which establishes a minimum price at which you may sell your grain. A premium is required to buy a put option, but it protects you from future price declines and enables you to profit from future price increases.
Keeping informed is essential for making wise judgments about crop marketing. You may take advantage of marketing chances when they present themselves by having a marketing strategy with acceptable profit objectives and being aware of your marketing options.