You can bet professional traders will have a plan going into the June 29^th report. As a producer, are you ready for the report? Do you have a plan to take advantage of price opportunities? No one really knows for sure what the report will say. Furthermore, no one is exactly sure how the market will react to this information. However, there are three quick things you can do before the report to be in a position to take advantage of opportunities.

1.       Review your cost of production. Many of us do a pretty good job of calculating costs toward the beginning of the year, but sometimes fail to update this information on a regular basis. Things change during the course of the year which may impact your cost. Purchasing additional crop inputs, equipment repairs, or unforeseen expenses should be evaluated on a regular basis. If you need a quick tool for calculating production cost I'd be happy to send you this basic spreadsheet.

 

2.       Yield is another obvious consideration going into this report. Crop conditions from one part of the country to another are wildly variable this year. Some areas have had plenty of rain while others are turning into a desert. Just as you adjust your cost of production on the move, it's even more important to estimate yield regularly. Run numerous scenarios with different yield potential in order to have a clear understanding of the price opportunity you'll need to cover expenses. Thinking in terms of “bushels per acre needed to cover costs” is a helpful approach.

 

3.       Market Price. Develop an understanding of what price level meets your individual margin goals. Once you know your costs and yield potential you'll be able to determine what price level is needed. The market is extremely volatile right now, that's why it's so important to have a tool in your hands for calculating the rapid changes. In addition to management tools like I've provided above, be sure to consider every tool that is available. Crop insurance is the most popular and commonly used tool among producers. However, there are many other marketing tools available which can help you manage risk and capture opportunity. Forward contracts, basis contracts, futures, and options are also great tools. If you're not already using these tools, it's time to start. There are plenty of market advisors and professionals who understand these tools that can help you improve profit margins! Volatility is likely here to stay, use it to your advantage.  Equip yourself with the best information - to create the best strategy - to capture the best opportunities.

 

Again, e-mail me at cbarron@cb-farms.com if you’d like a “Cost of Production Analysis Tool.”