As we enter the final stretch of the growing season, let’s review key concepts to better manage unpredictable markets.

What is your risk tolerance?

Most everything worth doing involves some degree of risk, if there is no risk, usually there is often little reward. In the business of agriculture, risk surrounds you from day one, yet we all are in our own unique situations. If I have bought and paid for the dirt that I farm and the equipment in my barn, my risk tolerance is very different from a heavily leveraged farmer with financed ground and equipment. At the end of the day, we must evaluate our own situation and decide how tolerant we are to market moves in our own specific situations.

Ask yourself a few questions in self-reflection:

Use your answer to assess how tolerant your finances and emotions are to a market move beyond your expectations in either direction. You can’t control how the market moves, but you can control the impact those moves have on your bottom line.

Defend from financial plan

Often, I will tell prospective customers, “We are all very risk tolerant, until we are not,” and that’s really the core goal of managing risk. You will probably make it to the other side without managing risk, but there most likely will be a time of financial pain along the way. With better risk management, it will be much easier to handle. The point is, managing risk is not simply about keeping the farm, it is about avoiding financial hardship when you are wrong or something unpredictable happens.

Defend your cash position

To build a little on my last point before moving to four points of focus, we need to think about what risks we are actually trying to manage. The risk profile of a trader compared to a farmer is very different and much of the education available comes from a trader’s perspective versus a farm perspective. The cash position or cash bushel is what differentiates your marketing goals from a speculative trader’s goals. Keep the cash bushel at the forefront of your marketing decisions and use marketing tools that defend cash positions.

Key takeaway: Don’t replace your cash marketing with options. Instead, defend your cash marketing with options.

As we enter the final stretch of the growing season, the yield debate will continue, the demand picture will continue to unfold, and there is likely to be a slew of outside geopolitical influence on your markets. It would be impossible to predict where your markets will be 3, 6 or 12 months from today. Avoid the temptations of price prediction and use these 4 tips to protect your farm’s future.

Check out these four tips for consistent success in farm marketing:

At the end of the day, you are one who decides if you are going to manage risk and how you are going to do so. Individually, we must live with our choices. The markets have presented opportunity and those who complain about prices, are usually the ones who’ve done little to manage market risk. You’ve never had more tools available that help you accomplish this goal.

Contact Advance Trading at (800) 747-9021 or go to www.advance-trading.com.

Information provided may include opinions of the author and is subject to the following disclosures:

The risk of trading futures and options can be substantial. All information, publications, and material used and distributed by Advance Trading Inc. shall be construed as a solicitation. ATI does not maintain an independent research department as defined in CFTC Regulation 1.71. Information obtained from third-party sources is believed to be reliable, but its accuracy is not guaranteed by Advance Trading Inc. Past performance is not necessarily indicative of future results.

The opinions of the author are not necessarily those of Farm Futures or Farm Progress.