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Be wrong earlier than later

Agriculture.com Staff 12/17/2007 @ 11:57am

Let's face it, it's a no-win situation. When looking at deferred prices for 2008 and even as far as 2009, no matter what marketing decisions are made today, most likely you will be able to look back and second guess.

In fact, that is always the case with a marketing decision. With this year's heightened volatility, regret and euphoria as well as a multitude of other emotions, may be experienced. However, with strategy, emotion can be kept in check. If you are making sales and prices continue upward, the natural tendency is reluctance to sell more despite even better opportunities. You begin to believe you have made a mistake by selling too soon.

While it may be a natural feeling, it should also be a welcomed feeling. You as a farmer focus your efforts producing a crop. Yet, you should also focus your efforts on selling rallies. Understanding all of your marketing tools and alternatives is helpful. If you are selling cash, but don't use futures or options, then you should be pleased with that sale, regardless if prices continue to rally. If you do sell early, consider fixed risk re-ownership option strategies.

Since it is unlikely you will have confidence to sell 100% at one time, we suggest that if you are going to err in making sales, we would rather see this early in the season when uncertainty is generally its greatest and prices their highest. If you wait to take marketing action until a crop is at hand, prices are usually lower.

In other words, sell early and often. If you sell early and the market moves higher and you make an additional sale, your average price is higher. If this strategy backfires, it obviously means there is a bull market. In some years, making no sale is the best strategy. History still tells us this does not work well in most years. Therefore, if making a "mistake", on early sales, it means that your net worth is growing.

The alternative is to wait it out and see what happens. While this may have paid dividends this past year in the bean market, corn, as of this writing, has yet to move back to the levels that were achieved last winter. In addition, there have been many years where the market rallies sharply, only to rapidly fall apart and leave a long bearish tail. Then regret is usually greatest.

If you have any questions or want help implementing a strategy for 2008, please contact Bryan Doherty at Top Farmer: 1-800-TOP-FARM.

Let's face it, it's a no-win situation. When looking at deferred prices for 2008 and even as far as 2009, no matter what marketing decisions are made today, most likely you will be able to look back and second guess.

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