Power of attorney makes for fast, efficient trades Call a commodity broker to make a futures or options trade - probably. Hire a marketing consultant to develop a sell strategy - maybe. Give him power of attorney (POA) over your marketing moves - whoa!
But that's what Keith Ahrens has done - with no regrets. This Blair, NE, grower is at ease about marketing, especially since 2000 produced added revenue of over 40/bu for corn and 25 for soybeans.
Power of attorney is defined as "a legal instrument authorizing one to act as another's attorney or agent." In the movies, it's often tied to unscrupulous behavior; i.e., the greedy, deadbeat son strips his aging mother of decision-making power.
If working to attain crop prices that are the top third of the overall market is greed, Ahrens is guilty. He, however, has developed enough faith in the Brock Associates marketing service to give it power of attorney.
"I started using the service about two years ago," says Ahrens, who farms about 700 acres each of corn and soybeans. "I used to handle futures and options trades, but just wasn't able to devote enough time to marketing. Giving Brock Associates power of attorney makes marketing a lot easier."
Ahrens' marketing advisor is Dale Schultz, who represents Brock out of Hastings, NE. He regularly consults with Schultz, but it's sometimes impossible to discuss up-to-the-minute pricing decisions when the trigger must be pulled.
"I trust him to make the right marketing move," says Ahrens. "It's like a doctor; you have to trust him to solve your health problems."
Of course, Ahrens goes only so far with the power-of-attorney privileges. Brock only has POA over the trading of his commodity futures and options. Ahrens is still responsible for cash grain sales.
The company actually has POA over futures and options trades for production from about 500,000 acres nationwide.
"When trades must be made instantaneously, we can't call farmers for all those acres at one time," says Richard Brock, president of the Milwaukee, WI, company. "With POA, we can make the necessary trades quickly and efficiently."
Making cash sales for growers would also complicate transactions. "Cash sales are up to the grower," says Brock. "They know where they want grain delivered." Schultz, however, does advise Ahrens and others about when to make cash sales.
Ahrens' corn marketing for 2000 began in May and June. On May 25, December $2.43 corn futures were sold to hedge 25% of the crop. An options strategy was also implemented on another 25%. "December $2.50 puts were bought and two December $3 calls were sold on a one-to-two ratio," says Schultz. "All the positions were exited in late July with a net profit of about 42."
For beans, another options strategy was implemented on June 1. November $5.25 puts were bought and November $6.50 calls were sold, again on a one-to-two ratio. "We exited those positions in July for a net profit of about 25."
Through early December, no cash sales had been made, but LDPs were taken on both corn at 48 to 54 and beans at $1.06.
Schultz anticipated a stronger demand for corn once the StarLink issue gets resolved, provided it didn't drag into January. The price potential is 20-25, he says, adding that "as long as the demand for nearby grain remains strong, we will look for signals either technical or fundamental that the price rally has reached its peak before we begin to make sales."
Strong crush margins for bean processors should help keep nearby bean demand firm. "The amount of demand for soybean meal from Europe, due to the ban on bone meal in their feed, will dictate how much price potential exists," says Schultz.
Ahrens always meets with Schultz to develop a tentative marketing plan. They discuss the anticipated production and potential price levels. "We also visit at least once a week to discuss current conditions," says Ahrens. "He also contacts me when a transaction is made."
Kim Anderson, grain marketing economist at Oklahoma State University, says some larger operators are taking this route. "They're large enough that they don't have time to keep up with all that's happening in the markets," says Anderson. "But they're not large enough to hire their own commodity merchandiser."
He says many cotton growers have turned the marketing over to marketing cooperatives, such as Plains Cotton Cooperative Association in Lubbock, TX. One of several cotton marketing co-ops, it handles sales of production from thousands of acres annually.
"That's not much different than an individual working directly with a marketing consultant who has marketing POA," says Anderson.
There are limits to which POA should be used for futures and options, says Anderson. "As far as speculative positions are concerned, that's not a good idea - unless they have the money to spare."
Ahrens' program fits that mold. "It's strictly on a hedging basis," he says. "There is no speculation. They either buy or sell to match the amount of production I can expect."
Marketing Clubs Expand Reach Marketing Clubs can expand their knowledge by participating in teleconferences developed by the Marketing Club Network.
Based in Mississippi, the network encourages clubs to participate in a series of monthly meetings featuring comments by respected market analysts. The teleconferences focus on cotton, corn and soybean topics and include 50-80 clubs from 11 states.
Recordings of past teleconferences are available at the Mississippi Farm Bureau Web site (www.msfb.com/content/farmbureau/marketingclub2.htm).
This year, teleconferences have been scheduled for the following dates: Jan. 16, Feb. 13, Mar. 13, Apr. 12, May 15, June 14, July 13, Aug. 14, Sept. 14, Oct. 16, Nov. 13 and Dec 13. All teleconference calls are at 7:30 a.m. Central time.
To participate in a conference, contact Jackie Smith at 806-746-610 or Carl Anderson at 979-845-8011 prior to the conference date to gain access to the 800 number.
New Insecticide Kills Rootworm Adults A new way of controlling corn rootworms involves leaf-spraying a low rate of an insecticide to kill the adult beetles.
USDA-ARS scientists have worked with industry leaders to create an insecticide that can be sprayed on plant leaves at one-tenth the rate normally applied to kill rootworm larvae in the soil.
Scientists were looking to solve dual problems with spray-applied biological control agents. But rain was washing away the pest-killing viruses and bacteria soon after they were applied, or the sun's ultraviolet rays quickly killed them.
The remedy was a new spray formulation, according to the scientists. It contains a sticky protein from wheat gluten. The gluten is made soluble by a chemical such as citric acid. Spray droplets of the substance adhered like glue as they dried and successfully shielded the microbes from ultraviolet rays.
A patent was issued for the formula in 1996 and it's now marketed as Cidetrack by Trece, Inc., Salinas, CA (www.trece.com). When Cidetrack is applied with any of three types of insecticides - pyrethroids, carbamates or organophosphates at one-tenth the normal application rate, the combination has worked better than conventional sprays, they say.
An article about the research can be found at the ARS Web site (www.ars.usda.gov/is/AR/archive/nov00/insect1100.htm). Trece, Inc can be reached at 831-758-0204.