Let’s first note that markets move and things change.
Over the past three months we’ve seen a 49-cent trading range in December corn futures, on 200-bushel per acre corn that equates to $98 per acre range in revenue. How significant would another $100 per acre be to your bottom line?
I believe many farmers feel they left some marketing opportunities on the table this past year, let’ s make sure we aren’t trying to make up for past mistakes by swinging too big this fall.
So, managed money, or the funds, have covered much of the big short position in ag commodities. They are positioned to move markets dramatically in either direction going forward. This comes in the gut slot of harvest as many of America’s farmers remain historically undersold. Farmers are asking themselves the billion dollar question as they figure out what to do with their grain: What will the next few months hold?
First, be careful what information you consume. What are you feeding your mind? Sensational headlines and stories spread like wildfire. Just because a message is loud or easy to accept, does not make it correct.
Be careful what you feed your mind and the bias that could develop from the information you consume. This will impact the marketing decisions you make.
Second, broadly gain control. The first half of your crop is the easiest to market. The last half is more difficult. Avoid the half-right, half-wrong approach to marketing and get broad control of your balance sheet, as doing so will enable your decisions to have larger financial impact across your operation.
The only way I know how to confidently execute a broad marketing plan without overexposing and overcommitting is to use option-based strategies in your decisions. Building options into your plan helps you confidently defend the decisions you make and avoid the hindsight analysis that can come back to haunt you.
Finally, stay flexible in your decisions. Use tools that allow you to benefit if markets move higher and protect equity if markets unexpectedly break lower. Avoid black or white, directionally biased marketing advice and strategies.
Everything is bearish until it’s not. Everything is bullish until it’s not. And we all are risk tolerant until we are not.
Recruit a market buddy
Navigating these markets alone can be difficult. Find a person to hold you accountable and keep you balanced in your marketing approach. This person should help you execute when you don’t want to and keep you between the ditches when the marketing noise gets loud. Find an approach that works across multiple types of marketing and production environments.
This quote from Mark Twain fits the bill today:
“It ain't what you don't know that gets you into trouble. It's what you know for sure that just ain't so.”
The world has a funny and sometimes cruel way of humbling those who need it. If you don’t want the decisions you make this fall to come back to haunt you, keep these tips in mind as you make important marketing decisions.
Reach out to Advance Trading and be sure to read my previous Farm Futures articles.
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