Al Kluis: Using a market advisory service
I have been providing farmers with advice and recommendations for 36 years. The products I offer and how I communicate with farmers have changed dramatically the last five years. How farmers use market advisory services has changed, as well.
The dramatic change in what I provide has been brought about by technology – especially what I send and provide through the Internet. What farmers want has also changed with more volatile markets and less government involvement.
In September 2010, I sent out a survey to current customers and customers who had not renewed. The responses were mostly positive and enlightening. The majority indicated they liked the information and recommendations. Three of my most popular services that farmers use, I wasn’t even offering two years ago. Those are the morning e-mail updates, webinars, and text message action alerts. I found out that when people did not renew, the main reason was because they were not using the information.
To end up with results that you like, you have to do your homework. I would encourage you to try a trial subscription to several different services. See if you understand the information and if it fits the way you think. If the service recommends a lot of futures trades and option trades, and you do not use futures or have a brokerage account, then odds are it will not work.
I find it useful to classify what type of market information farmers want when they sign up, and then I customize the information to fit their needs. I use three broad categories.
Farmers in the “A” category use cash sales or forward-contract only. “A” farmers are looking for help with setting price targets where they should make sales and the timing of when to sell. They will give up some potential basis gains on new crop sales to avoid the stress and possible anxiety of the margin calls that come with futures and options. These customers often have a solid balance sheet with big bins and deep pockets. They have a pattern of holding too much grain too long, and they need someone like me to encourage them to pull the trigger.
Farmers in the “B” category use hedges, hedge-to-arrive contracts, and at times will buy call or put options. They are very selective in using futures because of the potential for margin calls. But they do use all of the merchandising tools available to try and maximize storage income using the carrying charges and basis appreciation to add onto their bottom line. These farmers get daily information, quotes, and action alerts over their phone and the Internet. They are willing to spend some time each day to stay informed.