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How to know when you're selling value

Agriculture.com Staff 07/06/2010 @ 5:10pm

Getting current on cash sales, whether old crop or new, can be an intimidating task at any time of year. If you feel like you've "missed the boat" making sales this year, you may want to evaluate what you might do differently next time around. But be good to yourself. Do your evaluation with clear perspective, without emotion clouding your view of the markets.

In the paragraphs that follow, let's focus on the importance of selling value and what that means. It can help provide much-needed perspective.

Selling your grain on the top range of the market is an annual goal for most. I encourage producers to keep their perspective, however, of where the top range is in the current market. I have had far too many conversations with producers who lament, in hindsight, that they did not sell enough grain when prices were high. They were holding out for a clear sign, and in the process, lost perspective of the value range. It goes back to the old adage of not being able to see the forest through the trees.

Will the market go higher or lower from here? Tell me if there will be an early frost, and I'll be able to tell you exactly where this market will go. My point is that as a producer, you will not be able to accurately predict the weather. So it is imperative to take a step back and historically look at the rare instances when prices are extremely high, and conversely, when prices are extremely low. When you do this, you will know where the peaks and valleys are, and from there, it becomes clearer where VALUE lies. You will see where prices are offering a good value overall. Then you can sell value, even if you do not hit the top of the market.

In fact, I would encourage you to print the continuous monthly corn and soybean charts below and post them where you will see them daily. Then, when the market does work higher or lower, you'll have a sense of where, historically, the current price is offering relational value.

The Blue line represents a $3.00 Chicago Board Price. Look back at how many years corn traded below $3.00 -- nearly a ten-year stretch! Now look at how prices are flirting with that line again.

Click here to see a larger version of this chart in a new window.

The blue line represents a $10.00 Chicago Board Price. Look at how today's prices relate.

Click here to see a larger version of this chart in a new window.

I hope this column has reminded or informed you of historical highs and lows, so that in coming years, when prices are high, you might be more courageous to secure your hedging and pricing needs. That way you will not consistently be among the lamenting producers who say, "I should have sold more."

If you have questions, you can reach Naomi at nblohm@stewart-peterson.com, or post a marketing question in the Women in Ag discussion group.

Getting current on cash sales, whether old crop or new, can be an intimidating task at any time of year. If you feel like you've "missed the boat" making sales this year, you may want to evaluate what you might do differently next time around. But be good to yourself. Do your evaluation with clear perspective, without emotion clouding your view of the markets.

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