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Why sell at $4.05 when I think (know) I’ll get $4.17?

Shoot the deer in your headlight.

I cannot tell you how many times I've had orders in to sell corn, for example, at $4.17. The market gets to $4.16….and in just two days the market falls to $3.90 and I am not sold. How did I miss that? Does the market actually know where my order is? How can the market hit Jim's or Joe’s order, but always falls shy of my order? Why do I mentally hesitate to simply sell “at the market” when the market fails to hit my exact price? Am I so stuck on getting my forecasted price of $4.17 that I am a deer in the headlight and cannot sell at $4.05? 

Or another situation is if I get started selling at $4.17 and then the market breaks to $3.90. I have difficulty selling below my initial sale price. I was taught to sell rallies -- not lower than my starting price.

Again, that dang deer.

Is this you?

I am guessing that many struggle with the same problems. To help get your head out of the commodity market cave and back into the profit page, our team released an app that helps you to stay focused on profitability - not so much on price. How do we do this and what are the results?

Although we just rolled this out, the feedback is good. The app monitors your breakeven and adjusts it real-time based on inputs and a cash market you choose. It also adjusts on the sales you’re making.

The result is that when you make that sale and lock in a $100/acre profit, it lowers the breakeven on the balance of inventory and thus reduces stress.

In doing so, your brain gives you confidence to sell, as the operation is profitable.

To say it in another way, you can still make money -- so this eliminates the deer in the headlight.

Another huge tool is it allows you to test any type of position or strategy you want for any quantity. The profitability graphs that analyze the strategy will help you understand how many bushels to sell in order to “balance” your risk.

In common terms, selling 50,000 bushels creates a problem as your brain thinks you managed some risk and you can worry less. But the revenue graphs will show you that you must sell more. A simple quantity adjustment will mathematically balance risk better and hold a farm profit no matter what happens (and still leave you with significant unpriced bushels to capture a rally).

Focused on profit

As for missing the sale at a price, selling at $4.05 might be a better sell than $4.17. First, we can get the order filled at $4.05 and as long as that generates a profit…it is far better than no sale. Second, there are things we can do to improve the price that doesn't require speculating. For example, the “carry” or “spread” between Dec20 and July21 prices will most likely trade at a 30-cents premium to July due to CME storage cost policies. If you have storage, rolling your December hedge out to July would add 30 cents on to your $4.05 sale for a total $4.35 price. Now you have exceeded your initial goal of $4.17 with one transaction.

Having a plan to sell your grain is important, but even more important is to get the hedge on as long as you can lock in a profit, even if it has not hit your planned price. You’re implementing a plan to enhance and merchandise your grain like a professional.

Reach Bill Biedermann at 815-404-1917 or bbiedermann@agmarket.net
The risk of loss in trading futures and/or options is substantial and each investor and/or trader must consider whether this is a suitable investment. AgMarket.Net is the Farm Division of John Stewart and Associates (JSA) based out of St Joe, MO and all futures and options trades are cleared through ADMIS in Chicago IL. This material has been prepared by an agent of JSA or a third party and is, or is in the nature of, a solicitation. By accepting this communication, you agree that you are an experienced user of the futures markets, capable of making independent trading decisions, and agree that you are not, and will not, rely solely on this communication in making trading decisions. Past performance, whether actual or indicated by simulated historical tests of strategies, is not indicative of future results. Trading infromation and advice is based on information taken from 3rd party sources that are believed to be reliable. We do not guarantee that such information is accurate or complete and it should not be relied upon as such. Trading advice reflects our good faith judgment at a specific time and is subject to change without notice. There is no guarantee that the advice we give will result in profitable trades. The services provided by JSA may not be available in all jurisdictions. It is possible that the country in which you are a resident prohibits us from opening and maintaining an account for you.
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