Farmers are not expected to be marketing wizards, analyst says
Market volatility has picked up in recent months and so has opportunity.
It is important you capture that opportunity.
Hindsight is great if you want to look at what you could have or should have done with your marketing. In the real world, everyone knows that each time you make a marketing decision, it is in front of uncertainty and unknowns. You have your hands full, being a producer and a manager of inventory.
Marketing takes a consistent effort to continually reevaluate the marketplace and make decisions that make sense for you and your operation. It also includes a level of expertise that allows you to navigate through choices of tools so you can incorporate the right strategy at the right time for the right reason. In other words, it takes a consistent dedication and hard work with no guarantees. You are not expected to be someone with wizardly powers, knowing when to make decisions leading to magical results.
There are multiple tools that you can use at any given time window to manage opportunity and to shift risks. Volatility has picked up in all commodities to levels that have not been experienced in years. It is imperative that you are prepared for potential market movement in the months ahead.
Currently, grain prices are in steep uptrends. History would argue that high prices cure high prices through declining demand and increasing supply. Bullish traders will argue grain and oilseed prices could be just starting a major advance. World demand is up and supplies lower. Yet, if weather improves in the Southern Hemisphere and U.S. farmers grow an exceptional crop, prices could be substantially lower by fall.
These are scenarios you need to contemplate and then prepare yourself for. Knowing your marketing tools and how to navigate through these scenarios provides a level of confidence and decreases stress.
Now is the time to visit your market adviser and have a conversation about scenario planning and using tools that capture higher prices or defend lower prices. Center your conversation about the goals and needs of your farm as well as the risk tolerance you are willing to accept. As you begin to map out scenarios and tools available to manage price movement, you will probably find that decision-making suddenly becomes much clearer and less emotional.
When decisions are made, you move away from worrying about what-if scenarios to managing what-if scenarios. Good advisers know they cannot accurately predict the future or price movement; however, they will also suggest that keeping informed of market conditions and adjusting your strategy as time progresses are critical.
The bottom line is that a good communication channel considers different market scenarios, the cost to preparing for these (and cost if you do not prepare), implementation, and then managing the expectations. Take time now to plan and implement your strategies. In the weeks ahead, your thoughts will naturally shift more toward preparation for spring planting.
If you have comments, questions, or suggestions, contact Bryan Doherty at Total Farm Marketing. You can reach him at 1-800-TOP-FARM, extension 300.
Futures trading is not for everyone. The risk of loss in trading is substantial. Therefore, carefully consider whether such trading is suitable for you in light of your financial condition. Past performance is not necessarily indicative of future results.