Does Lucky = Good in Grain Marketing?
My original marketing plan for the 2014 crop of soybeans called for an increment to be sold after planting was finished and the crop got off to a good start.
Planting went fast, but unfortunately, not under the best of conditions. Excess residue from the previous year’s crop resulted in uneven stands and some problems with moisture and nutrient availability. I decided to hold off in making that first sale until conditions were better.
The time to again look at forward-contracting came during the driest time of the summer, as it has the past two summers. With the few acres I've had since my first retirement, being bold in forward contracting did not seem prudent.
The next event on the long-term seasonal charts shows good odds for price strength in August. This is usually based on fears by the trade of an early frost or some other weather event. This year, optimism started to come into soybean futures slightly earlier than normal.
The first actual scare started around July 11. Each time there appeared to be a return of the bull market, the rally lasted only a few days. I count four peaks and three valleys as the market tried to decide on direction. Knowing that there are usually only two to four price peaks during this time, I started to try to pick a time to make a sale. Even though the ideal time to sell had not been reached, as I watched the prices go up and down at least three times, I got nervous that the rally might be premature this year.
My anxiety was strengthened when I made a scouting trip to assess yield prospects. The beans here at the homeplace suffer from very dry conditions. However, they appear to be podding well. My optimism was strengthened as I got closer to the Missouri River where rain totals were close to 4 inches in the last two weeks. In fact, new growth with additional pods showed that there is still time for development, if the weather stays cool and there is more rain soon.
I did my scouting on Saturday morning, while my wife, Sharon, was doing other things. I wanted to make the sale in the cash market, which meant getting an order into the local elevator. In my marketing meetings, I emphasize using 'good 'til cancelled' orders with reasonable targets to make sure that you do not miss a good price if it is of short duration. Attending a funeral was on the agenda for Monday morning. I called promptly at 8 a.m. and put in the order to sell new-crop beans for $10.00. I did not hear the markets anytime during that day. I heard that there had been some strength early but that beans had closed sharply lower. I did not even call to see how I had survived the volatility. When I got my confirmation the next day, it showed $10.03. Thank you, madam grain merchandiser!
The price quoted at the close on Thursday was 37 cents lower than the price on my contract. Sometimes you just get lucky when dealing with the markets, whether it is cash or futures. This time, I am going to say that it was the result of a well thought-out strategy based on research and implemented with discipline. Now if I had just sold more at the higher price!