An expression I have never agreed with is “you can’t go broke making a profit.” I have seen this used on various social media platforms and at trade show meetings by people who probably advised you, the farmer, to price bushels at levels that turned out to be well below the market. They are defending their flat price advice that turned out poorly. I would argue that it is possible to go broke selling at a profit if there are enough years where prices do not allow your business to be in the black. Therefore, it is important to maximize the good years, such as 2020, so that we have the cushion to absorb the next tough year that lies ahead. There will be tough years again, unfortunately. Let us hope one is not coming soon.
Your marketing plan should be one in which the approach can be repeated year after year. In my opinion, your marketing plan needs to be repeated in up years, down years, and even flat years. There are many who only rely on the “sell or don’t sell” philosophy who are priced well below where prices are trading today. This is hard to repeat as prices are different each year and the emotions you feel are unique to each crop year.
I suspect we have seen more sales under $10 for soybeans and $4 on corn than above. However, where this can turn sour would be the scenario where you sold 2020 bushels well below the high prices, and then compound this by doing a poor job marketing the 2021 crop. Those who sold too early will now expect and target much higher levels on the 2021 crop to “get back” what was missed on 2020 sales. While that may work, it can also fail. Every year has different reasons for price and the 2021 crop does not owe anything for those regretting early 2020 sales.
What's your perfect marketing plan?
If you know me, read previous articles I have written, or have heard me present at various meetings over the years, you know Advance Trading does not believe in price prediction. That has been the original building block of our group since we began serving farmers directly in 1984.
I am aware of what the perfect marketing program would look like in the eyes of many. Someone you hired would call when prices are at the highs and simply say now is the time to sell and they would be right. No account papers to fill out, no margin calls, no premiums to pay, no managed bushels out of your control, and no decisions to make other than calling your local elevator to price your bushels. While you can find people selling these types of programs, I do not believe you will achieve the successful results you are searching for with it. It is difficult to repeat what you did each year. If this type of positive advice existed, would not every farmer subscribe and never miss out on pricing opportunities? Or would not this same individual simply find a beach or a spot in the mountains and trade for their own account?
Due to the timing of this rally, I suspect many of you do not know how to sell or protect 2021 levels on a meaningful percentage. You have a fear of selling early like in 2020 and missing out. I understand your feelings, but price and opportunities come and go historically. You don’t want to be watching and waiting if you don’t have objectives in mind and floor prices built into your plan.
So, while I do not believe there is something as simple as being told the magic day to make sales exist, I do believe there are simple ways to manage price and improve your marketing. Our group has written many articles in Farm Futures detailing how this can work. To work for you, it must be something you can repeat every year. I have heard from many this year how they wish they had bought calls after sales were made. You will rarely own calls in this type of market if you cannot find a way to repeat it each year. Those who bought calls in previous years are more likely to own them this year.
Repeatable marketing works when you have a solid philosophy/plan in place because you are comfortable in your execution.