December 13, 2021
As the Christmas spirit spreads across America’s heartland, I can’t help but try to sculpt a classic Christmas tale into some sort of grain marketing lesson for the farm. Many lessons could be pulled from “A Christmas Carol,” the obvious to me would be the lessons Ebenezer Scrooge learns with visits from ghosts of past, present, and future.
Much like Ebenezer Scrooge’s initial feelings towards the celebration of Christmas, many farmers could ‘bah-humbug’ and be equally frustrated with grain marketing and the associated volatility. Might some visits from these ‘ghosts’ open our eyes to how pitfalls from our grain marketing past impacts the marketing decisions we make in the present and future?
The ghosts of grain markets past
Let’s first visit some of the grain marketing ghosts of our past, which is usually the culprit for much of our grain marketing pain. We have to live with the marketing decisions we make and the results of those decisions. Being financially tied to those decisions makes it impossible to avoid adding up the dollars banked or dollars left on the table afterwards.
Tomorrow, the market will move, things will change, you’ll know if you hit the high, you’ll be able to determine if you made a good sale, or you might figure out you left a few pennies, nickels or, like some did last year, dollars on the table.
Last year’s epic rally had many producers marketing crops aggressively and ‘running out of bushels’ to sell quickly. This was likely the result of the previous 4-year’s short-lived market rallies and an, “If I just get back to $4 corn, I promise I will sell,” mentality.
Past results then impact your future decisions. If we make decisions with a bit more ‘flexibility,’ whether that is managing a price floor with cash upside or managing a long call strategy after making a cash sale, those more flexible decisions will prevent some of these ghosts from haunting you next time. Flexible decisions give you a pretty good idea of where you will stand across various market scenarios and a calculated way to manage your positions in those scenarios. We just can’t know which scenario will play out. Usually, we make marketing decisions for a ‘reason,’ and typically our greatest marketing failures come from underestimating the market’s potential.
The ghosts of grain markets present
The marketing decisions in front of you today are far from black or white, and the answer you seek to where this market is headed will only be clear in hindsight. What we do know is that if you produced the bushels this year, you have the best prices we’ve seen in years, and with last year’s input costs, likely the best margin you’ve seen as well. How much higher can the market go? The cards are yet to be played there my friends. Global production, demand and geopolitical events will have a big impact on where these markets need to go. As a producer, I would plan for plenty of volatility, and be ready for something ‘unexpected’ to catch the trade off-guard.
We know what we know when it comes to the present, and that will all change in the future. Be careful how much weight you place in the known factors of today, the known knowns and the known unknowns. As Mark Twain said so well, “it’s what you know for sure that just ain’t so” that can so often get you into trouble.
The ghosts of grain markets future
When we look to the future, I’d remind you of the past. After the past few years, it really should be obvious that the market is impossible to predict. Those who try, typically have volatile, inconsistent results, and big swings on their year-to-year balance sheets. There is ‘another way,’ that allows you to have control, manage the risk you need to be managing and protect important equity, all while retaining future opportunity to improve your balance sheet. Making decisions, choosing your path, the tools you use, and the philosophy and strategy you implement, is up to you. We are here to help.
Wishing you all a Merry Christmas and a fantastic Next Year!
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.
About the Author(s)
Risk advisor, Advance Trading, Inc.
A Dodge City native, Brady joined Advance Trading in 2017. After graduating from Kansas State University, he spent the first four years of his career as a crop scout and advisor, assisting dryland and irrigated farmers with production decisions. Prior to joining ATI, Brady led a specialty corn project in western Kansas, working with both producers and end-users. At home, he enjoys spending time with his growing family, raising Angus cattle, coaching kids wrestling, and an occasional round of golf.
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