Marketing Tips From Soy Roy
Roy Smith (Soy Roy) launched a farming career from the ground up, and he’s a self-proclaimed market analyst. Known to many as Soy Roy, Smith is past vice president of the National Soybean Association. He recently sat down with Agriculture.com’s Mike McGinnis for a question-and-answer session.
SF: Why have you always been interested in grain marketing? That’s not true for a lot of farmers.
RS: The frustrations that I felt from 30 years ago, being unable to execute a marketing plan suitable for what I was trying to accomplish, pushed me to be more interested. A meeting in 1980, between a group of farmers, made the group decide that there had to be a better way.
That better way was discovered by a University of Nebraska graduate student’s research project. He analyzed 130-some strategies. What he discovered, much to our surprise, was that it was more important to do the strategy on time rather than implementing the exact strategy.
For example, if you bought a put option, sold futures, or sold cash around May 1, chances were pretty good that strategy was going to be successful. Whatever you did, if you waited until harvesttime when the elevators were full of grain, chances were that, whatever the strategy, it was not going to work. Since then, individually and as a group, these concepts have worked very well.
SF: If farmers would adopt them, what simple marketing moves could help farmers right away?
RS: Drop-dead dates are important to use. If you have put grain in storage, there are certain dates by which you want that grain sold and gone. For me, the drop-dead date for soybeans is December 31. I want my beans priced by December 31. For corn, my drop-dead date is July 1. So, if I have corn in the bin, I have it sold and gone by June 30 or July 1. Over the years, that strategy has saved me a lot of money.
Also, a dead-cat bounce in the market occurs 15 days after harvest. Put your crops in commercial storage, count 15 days, and when they pass, you start looking to sell them. Sometimes you may have to wait a little bit afterward, but year-in, year-out, that 15-day rule has been very profitable.
SF: What market patterns can farmers safely rely upon, whether season to season or year to year?
RS: My whole approach to marketing strategies revolves around seasonal price trends. I’ve been keeping seasonal price trend charts for 30 years. In fact, if you go back to the 1980s, price patterns then are similar to price patterns today. I do bring the price patterns up to date with current market-related information. Even looking back 20 years, you will get a price movement during these seasonal periods.
SF: Is hedging worth it?
RS: Depends upon your definition of hedging. Most farmers work with their local elevators to hedge. I think the local elevator can be the farmer’s best friend, when it comes to marketing. With one caveat: Futures trading can be very difficult. It can work well, and it can lose you a bundle of money. You need to know how to get on the right side of that.
SF: How did you coin the phrase John Deere low?
RS: In about 1984, when farmers had corn or soybeans in the grain bin, the price would go down when John Deere machinery payments were due March 1. That is no longer the case, but back then, if you were going to sell grain to make machinery payments, you needed to sell before March 1. Chances were real good that the market’s top would be in place by January 1.
SF: You are also known for the phrase dead-cat bounce.
RS: I borrowed that from an economist on a show called Wall Street Week. It means if you drop a dead cat from a building, you’ll get a little bounce (it won’t get up and go anywhere, though). Anything that goes down so far, so fast, is bound to bounce. That soybean market strategy is so reliable. It has taken place every year beginning October 1 and ending January 1 in the last 30 years except for one – 2015. You know that cat is going to bounce to the tune of 35¢. Most years, it’s 50¢, and for the last four or five years, it’s been $1 per bushel. You take $1 per bushel times all of the bushels that you have ever grown in farming, and it’s a lot of money.
SF: Which farmer habits make you scratch your head, in terms of grain marketing?
RS: Probably the most blatant problem farmers have is putting the crop in the bin and leaving it there until it’s time to empty it for the next year’s crop. That is almost universally a way of losing money. It is so hard, psychologically, for farmers to sell it.
SF: What has given you the most fulfillment in your farming career, and what are you the most thankful for?
RS: In the late 1960s, I started farming by renting land from retiring farmers. My family didn’t have enough acres to be a viable operation. I scraped and dug to get enough acres to make it work. I enjoy the grain marketing side, meeting and working with people.
SF: As Soy Roy, you were one of the first farmers to participate on the internet with Agriculture.com. Why?
RS: In 1983, I bought a computer for my college-age daughter. That connected me to other farmers. I made lifelong friends – and nonfriends. I still get responses from web visitors on my articles. I also used that computer to keep track of my crop inputs and CBOT prices. I developed a spreadsheet that looked like a settlement sheet of a grain sale. During harvest, I kept a record of grain sales. As soon as I finished harvest, I would hand my landlords a copy of my spreadsheet showing how many bushels they had and what the crop was worth. People liked that. That helped me rent some farms.
Name: Roy Smith
Title: Retired farmer and past president of the Nebraska Soybean Association
Background: Served as a vocational agriculture teacher before beginning to farm. Smith kicks off his winter grain marketing speaking tour this month in Grand Island, Nebraska.