New tool helps farmers market grain

by | Jan 18, 2019 | 5 Ag Stories, News

Yesterday we discussed the importance of forming a crop marketing plan.

Today, we view a new tool, designed to help farmers market grain.

Cargill launched Portfolio Builder this week, in an effort to help farmers diversify their grain marketing plans. Ben Kunzia, product lead for Cargill, says Portfolio Builder simplifies grain marketing.

?You may have heard the old adage that two-thirds of farmers are selling in the bottom third of the market. At Cargill, 70-percent of sales made by farmers are done in the bottom third of the market. What we?re doing with this new product is trying to get a more business-minded and strategic approach to sitting down and developing a diversified grain marketing plan,? Kuznia said.

?In its simplest form, Portfolio Builder is a grain marketing contract, combining four common risk management strategies into one diversified grain marketing contract,? according to Kuznia. Kuznia breaks down each component.

?There?s a seasonal component, or an averaging mechanism, that prices an equal portion of your grain from March to the end of June. There?s a floor component that locks in a six-year, concrete floor at the beginning of June and gives you unlimited upside all the way through harvest. There?s a target component. We took Iowa State University and Kansas State University Extension Service?s cost of production and then looked at what target price would give our farmer-customers a 15 to 18-percent return on investment. Then we?re going to work on a working order, on 25-percent of Portfolio Builder, to achieve that price. The final component is our enhance component which is going to give our customers the opportunity to price bushels daily above current market values.?

Cargill believes, “By combining these four elements and equally weighing them as 25% in this mutual fund/index, it’s going to take a lot of stress and risk off the table.” More information about Portfolio builder can be found at www.cargillag.com or by contacting a local Cargill representative.