Moscow, Idaho — University of Idaho agricultural economist Xiaoli Etienne has been shocked by the number of large-scale grain farmers throughout the region who acknowledge having no formal plan for managing risk and marketing their commodities.
To help farmers address what she considers to be an essential and often overlooked aspect of running a farm, Etienne and colleagues from her department are starting a two-year, USDA-funded project aimed at understanding how the most successful farms manage risk. Findings will guide development of strategies and tools to aid farmers in crop marketing and risk management.
“I was surprised to see a lot of them have no risk-management strategies. They don’t have any plans to sell their crops at all,” said Etienne, Idaho Wheat Commission endowed chair in commodity risk management. “They just basically sell at harvest at whatever price the elevators or the coop quote them, and by doing this they are missing a lot of opportunities to have higher prices.”
Etienne will hire a graduate student who will start in the upcoming fall semester to help with the project. Farmers will participate in five- to eight-member focus groups covering the state’s northern, southern and eastern regions, tasked with coming up with questions for a statewide survey regarding marketing and risk-management strategies. Her team will work with leaders from the Idaho Wheat Commission, Idaho Barley Commission and Idaho Grain Producers Association to identify participants, with the goal of getting 500 surveys returned via mail or online.
Surveys will be conducted in 2024. Etienne aims to get a proportional number of returned surveys with the population of farmers in each Idaho county. Extension outreach materials will also be developed from the project.
Andres Trujillo-Barrera, director of U of I’s Agricultural Commodity Risk Management Program, will help design the survey and will analyze how producers select risk-management strategies. UI Extension economists Pat Hatzenbuehler and Brett Wilder will host Extension workshops and help develop an online risk-management resource center linked to the university’s Idaho AgBiz website.
Etienne hopes to develop several strategies and tools that will help producers select the best risk-management practices based on the level of risk they are willing to endure by the end of grant period in the summer of 2025. One tool that is envisioned will be an online dashboard. Producers will input details of their operation such as planted acreage, historical yields, break-even price and risk tolerance to generate a personalized marketing plan. generate a marketing plan.
“Producers focus a lot on the production side and getting the maximum yield, but getting the right price is also critical, if not the most important thing for the farm to continue to grow. Having this tool available to help producers have a better understanding of managing risk allows them to sleep better at night,” Etienne said.
Etienne advises producers to have a written plan outlining their approach to marketing and risk management. A good plan identifies the lowest tier target price necessary to cover expenses, adding in a small profit per bushel. Producers may wish to spread out their sales and set a goal of selling portions of their crop at various tiers.
“Some of the research has shown that’s the most reliable way,” Etienne said. “It’s not guaranteed to have sales occur at the highest price, but it will be the best one to make sure you can at least cover the bare minimum – that you can survive.”
Farmers may also opt to participate in futures trading – selling futures contracts that are agreements to deliver commodities at a specified delivery date. Furthermore, having crop insurance sets a floor that limits a grower’s losses after a tough season.
At the end of each season, Etienne advises growers to evaluate their plans to assess what worked well and what didn’t and identify opportunities for improvement.
The project was funded with a two-year, $300,000 grant through the USDA National Institute of Food and Agriculture, of which 100 percent is the federal share, under award No. 2023-69008-39276.
Xiaoli Etienne
Associate Professor and Idaho Wheat Commission Endowed Chair in Commodity Risk Management
208-885-5506
xetienne@uidaho.edu