Cash forward grain sales can play a strategic and stabilizing role in a balanced grain marketing plan. Here's how they fit into the broader picture:

What Are Cash Forward Grain Sales?

A cash forward contract allows a farmer to lock in a price for a specific quantity of grain to be delivered at a future date. This is done before harvest, often months in advance.

Benefits in a Balanced Marketing Plan

  • Revenue Certainty: Forward contracts provide predictable income, which is crucial for budgeting and managing cash flow.

  • Risk Management: They help hedge against price declines due to market volatility, weather events, or global trade disruptions.

  • Financial Planning: Knowing your revenue in advance aids in loan repayment planning, equipment purchases, and input financing.

  • Avoiding Storage Costs: Forward sales reduce the need for on-farm or commercial storage, saving on bin rental, insurance, and interest expenses.

Potential Drawbacks

  • Missed Upside: If market prices rise after locking in, you forfeit potential gains.

  • Commitment Risk: If yields fall short due to drought or disease, you may struggle to fulfill the contract, especially if you sold more than your insured production.

Role in a Diversified Strategy

A well-rounded grain marketing plan typically includes a mix of tools:

Tool Purpose When to Use
Cash Forward Contracts Lock in prices early, reduce risk When prices are favorable pre-harvest
Hedging (Futures/Options) Manage price risk while retaining flexibility When you want downside protection with upside potential
Cash Sales at Harvest Take advantage of spot market prices When prices spike or storage is limited
Post-Harvest Storage Wait for better prices When market outlook is bullish and storage is available

Best Practices

  • Don’t overcommit: Only forward sell up to your insured production.

  • Break sales into increments: Sell in 1,000–5,000 bushel units to spread risk and capture price rallies.

  • Set price targets and deadlines: Combine forward sales with seasonal price patterns and cash flow needs.