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Across the Editor's Desk: A hot marketing environment

11/16/2012 @ 3:26pm

Each year, when you put together your marketing plan, you can easily include estimates of how many acres you'll plant and your historical on-farm yield averages. This yearly data is used for early planning of seed, fertilizer, and diesel purchases, as well as other inputs. This type of management can help position you to increase profitability when it comes time to sell your crops.

But throw in uncertainty by way of faltering trading firms and the worst drought in 50 years (which drastically cut yields), and marketing decisions for 2013 and beyond become riskier. That scenario is playing out this year.

As a result of drought, the corn and soybean markets have been setting all-time highs, raising the risk of marketing. As of this writing, from its low to high, the December 2012 corn futures contract had a price range of $4.60, and November 2012 soybean futures staged a sharp $9.29 trading range from the $8.60 low to the $17.89 high.

Though higher prices do offer opportunity, the old adage that it's easier to grow a crop than to market one is being expressed again for 2012-2013. It's no secret that you are faced with the challenge of capitalizing on unprecedented price rallies.

How to reach your goals

This issue of Successful Farming magazine focuses on helping you achieve that goal by answering your “What now?” questions for the 2013 farm markets.

For instance, Al Kluis of Kluis Commodities contributes a story called “Harnessing Volatility." If you expect another volatile year for the farm markets, Kluis lays out six guidelines that suggest when to make cash and new-crop sales in 2013.

In her story, “Grain Tug of War Intensifies," Risk Management Editor Cheryl Tevis helps you understand how one of the biggest customers of your grain – the livestock producer – will survive higher feed costs brought on by this year's short crop. She also points out how the ethanol industry is feeling the impacts of drought.

Since their inception in the 1980s, you have become familiar with futures options and their value. And this trend shows up in a 2012 Successful Farming Marketing survey. The fresh data explains when and how the surveyed farmers are selling their crops, what percentage of farmers use futures and cash hedge methods, who they sell to, how many farm full time, and much, much more.

If you were burned by marketing firms that failed this year, you're probably wanting to know if you can trust the futures industry. Business Editor Dan Looker writes in “Futures Shock” that you need to do your due diligence when putting hundreds of thousands of dollars into any business, whether for inputs, machinery, or hedging. Can you trust the futures market as a price-discovery tool? Many of you, as well as grain elevators, are asking the same question.

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