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Get control again

Sometimes when bad things happen to good people, the natural
response is to become stuck in the mud and feel frozen. People become unsure
how to react, move, go on, exist. I write this as I think of the drought in the
Midwest and how producers are still reeling in pain, emotionally and
financially, from a devastated harvest.

Feeling as though their marketing plan has spiraled out of
control, many producers throw up their arms and do not know what to do. Therefore,
they do nothing. One look at the Palmer Drought Index Map reveals there is a
high level of red and dark red throughout much of the Midwest, especially in
the western Plains, Midwest and South. As we talk with producers in these
regions, the primary concern is the lack of significant subsoil conditions.
Without moisture soon, it will take timely rains in the year ahead to produce
an average crop.

Despite this bullish price outlook, producers recognize that
prices for next year are at a point to at least start making sales. So what to
do?

Most of us like to have good information to make decisions.
A lack of information leads to complacency. Furthermore, waiting for
information (or the market to move enough to fit your bias) could prove
detrimental. As grain and soy prices have slid over the last couple of months,
many producers are on the sidelines waiting… for something. Conversations seem
to go along the lines of, "We'll wait and see what happens in
winter." The problem with that approach is that if the markets continue to
slide, by mid-winter, producers may be waiting for a recovery to… you guessed
it… prices that are right where the market is currently trading.

In recent years, many farmers who have sold ahead feel a
sense of loss because prices moved higher. Yet, history indicates that, in most
years, selling ahead is prudent. Complacency could pay big dividends or prove
to be a disaster. Are you ready for those consequences?

2013 could be a critical make-or-break year for many. Tight
supplies suggest high potential for a price recovery. Note that the key word is
potential. Projected big supplies by fall could suggest significantly lower
prices. As you plan for 2013, be prepared for prices to move in any direction.
A big crop suggests much lower value than currently offered. Or, weather could
drive prices to new highs.

Implementing a disciplined, strategic approach to marketing
minimizes risks and takes the emotion out of marketing in a year like this. It
is more than just assigning some arbitrary numbers to yield or usage. As I’ve
advocated before, a process like Market Scenario PlanningSM prepares you for
whatever the weather – or the market – dishes out. If and when prices move,
regardless of direction, you already have a strategy in place and additional
plans to execute further strategy. You are ready!

Ultimately, your goal is not to make one or two winning
decisions. It is to build an average price over time so that if prices are weak
into harvest, you're positioned above what the market is offering. In addition,
you are positioned so that should prices rally on smaller crops, you can
capture the majority of the rally. Meet uncertainty with balance, strategy and
discipline, and gain control once again.

 

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

 

Market Scenario PlanningSM is a service mark of
Stewart-Peterson Inc.

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