Marketing can be a roller coaster ride as emotions play into the decisions you make.

With all the chatter and noise from various social media sites, weather forecasters, and price forecasting marketing services just to name a few, the emotions of greed, hope, and fear can be raised to extremely high levels.

As with so many things, the first step to improve your marketing performance is to identify individual tendencies or marketing “bents”, so that adjustments can made for the better. What are some of these human nature mindsets that can hamper successful marketing?

1) Having too much of a local/regional focus with respect to crop size

It is difficult when your region of the country experiences adverse weather (flooding, drought) during the growing season, while other areas catch ample rainfall and reasonable temperatures.

Many times when you’re in this situation you might feel prices should rally. Be careful on this one. The United States is a big enough country where large yields in other areas of the corn belt can more than offset your local/regional shortfall.

Furthermore, it’s a big world. Countries like Brazil, Argentina, and Ukraine have increased production to the point where the U.S. market share has shrunk a decent amount in the last 10 years. It is important to understand that your part of the world doesn’t usually impact futures price movement as much as you might think.  

Related:Four ways to manage a potentially bearish USDA Report

2) Being long to run losses and quick to take profits

How often have you stored grain without downside protection and paid commercial storage charges month after month, as prices continue lower? The thinking might be that “I can’t sell now as prices are lower than they were last month, and I’ve already got a lot invested in my storage costs!”

It’s another way of saying “I already have so much invested in this crop; I’ve got to wait it out for higher prices.”

Rolling basis contracts out to further months when there is futures carry is another example of being long to run losses. For example, a -0.35/bu. basis contract in a flat/declining futures market might get rolled to the next month where there is a 0.10 futures carry, making it a -0.45 basis, and then later rolled to a later futures month at a 0.12 carry, making the net basis -0.57.

On the other hand, after experiencing lower prices for a prolonged period of time and then finally seeing a reasonable rebound in prices, it can be relatively easy to fall into the trap of selling aggressively with no upside added (i.e. long call options). Seller’s remorse subsequently sets in when prices move sharply higher with no ability to participate.

Related:Why you need a fall marketing game plan

Another example of being quick to take profits might be owning long call options that finally become profitable, and immediately selling them for a tiny gain, and then witnessing a sharp rally after that decision.

There are ways to manage the positions in a disciplined, consistent fashion to capture equity if markets rally, while still allowing for further gains if the rally continues.  

3) Following the crowd

Sometimes there can be a sense of comfort knowing you are doing the same thing in marketing as your farmer friends and neighbors who are exclusively utilizing cash contracts (forward cash, basis, Hedge to Arrive contracts). However, there’s likely a good chance that they are not doing very well in marketing their grain.

A high majority of producers market their grain based on their bias of where prices are heading or on immediate cash flow needs. In my years in this business I have seen approximately two-thirds of the farmer grain consistently sold in the bottom third of the market. Is that the group you want to be a part of when it comes to marketing?

There is a better way, but it looks much different than what most producers are doing.

4) Thinking that not paying for something is helping your operation

There can be a feeling that using cash contracts is free because you don’t have to pay up front for anything. On the other hand, option premiums and fees and futures hedges can seem costly as they must be paid up front, making it more noticeable. But how much does avoiding the disciplined use of these tools really cost?

Let’s assume you produce approximately 200,000 bushels of corn in a given crop year. If you were waiting to make cash sales, with no downside protection in place, and the corn market declined by $1/bu., that cash sale marketing plan ended up with a price tag of $200,000. What if you got aggressive and sold 50% of your expected production, leaving no upside on those sales, and then prices rallied $1/bu. after the sales were executed? That sale would have cost $100,000, not to mention likely locking you up from making more sales at the much-elevated levels (especially if there were perceived crop problems).

No one would have called informing you that you owed those funds, but it simply came off the back end as you received significantly less for the grain when you actually sold it.

Buying put options, on the other hand, provides a net floor for a known cost, in the event prices drop, while still allowing for you to benefit from higher prices on those unsold bushels.

5) Assuming things will get better by doing the same thing over and over

It’s beneficial for us all to be positive and optimistic as we go through life. We all hope for better things to come in the future. However, is hope by itself a defendable marketing plan? How often do futures prices move the way you hope they will, and then continue to stay in that improved price range? What is the backup plan if prices aren’t as friendly as hoped?

If the marketing plan has not been very successful over the years, how realistic is it to think the marketing performance is going to improve by simply doing the same thing you’ve always done? With all the demands of the farming operation, is enough time and effort being invested in learning the marketing tools that are available to manage price risk?

Finding a trusted advisor with the heart of a teacher to help you understand the tools and execute a proven plan could be the difference between mediocre, below-average marketing and above average results.

Marketing is hard work, especially with all of the emotions we carry as humans. Identifying your unique tendencies and honestly asking yourself if you’re falling into these mindsets is the first step in moving toward significant improvement in your overall marketing performance.

Contact Advance Trading at (800) 664-2321 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. Examples are used for illustrative purposes and should be considered hypothetical.

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