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Roy Smith: K.I.S.S.

Agriculture.com Staff 01/05/2006 @ 11:00pm

One of my marketing philosophies has been to never argue with success. If someone swears by a strategy that they are successful with, I say more power to them.

There are really only two viable goals to market, increase income or reduce risk. Most of us probably prefer to achieve some combination of the two. If an individual is satisfied with the results, the marketing plan is a success.

One of the reasons I like marketing is that the results of any strategy are easy to measure. I have never been very good at elections. In my whole life, I can only remember winning two elections when there was an opponent. The grain market votes every day. It is easy to tell if I am successful. The votes are counted in dollars.

One of the elements of a successful marketing plan is that it be simple enough and easy enough to implement that the farmer will follow it. The old KISS principle is a good guide-“Keep it Simple- Stupid”. The more complicated the plan, the more likely it will be ignored when you get busy. The more complicated the plan, the more likely you will be to get sidetracked when the unexpected happens.

I find it interesting to read the comments on the marketing talk page. Even after some 20 years of studying markets, I find some of the approaches difficult to understand. Some people look at supply and demand and try to figure out which direction prices are going to go. They generally forget that available data are “projected” supply and demand. The real supply and demand will not be known until after the fact.

Some people study technical systems and swear by their accuracy in predicting prices. I always wonder how they reconcile that there are probably a hundred technical systems more or less. Any given time, some will say prices are going higher and some will say prices are going lower. If you have found one that works for you, use it. Just remember that no one can accurately predict price direction. They can only give probabilities as to what is ahead.

I find seasonal trends easy to understand and reasonably good guides to use for developing marketing strategies. As with any technique, experience makes them more profitable to implement. For some marketers, they are not sophisticated enough. I actually had one farmer tell me that he did not like my strategies because they did not involve enough trading.

Knowing that soybean futures usually trend lower during January and the first half of February has kept me from losing money being long futures during that time. I also know that days like Thursday are likely to be common during this period. Knowing that corn futures are usually flat in January has helped me avoid the frustration that comes with holding unpriced corn in storage through the winter. I also know that futures do occasionally go up such as has happened this winter.

Odds are there will be some price weakness in the weeks ahead. Odds are also good that March and April will be good times for grain prices. Of course there are other factors involved. Weakening soybean basis is a sign that end users are not as excited about the prospects as are the speculators. The last two weeks cash soybean basis has dropped about 15 cents in Eastern Nebraska. Is this an indication that prices are going to turn lower? Logic would say yes, but the markets are not logical. Psychology plays a big part in the direction of prices, and psychology is difficult to evaluate!

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