Margin Minute: How To Avoid Commodity Price Rejection

May 8, 2017 12:00 PM
 
 

When commodity prices begin to rise, producers start to make grain sales. Yet if those price gains continue, farmers quickly begin to question whether they sold too soon, leading them to sell less and less over time. The phenomenon is known as price rejection, and Iowa farmer Chris Barron of Ag View Solutions says there’s an alternative that is better financially and psychologically.

“You’ve got to be careful,” Barron points out. “You don’t want to be so heavily sold that you’re way oversold, but you also want to make sure that you’re engaging the market in a strong enough way during a market rally.”

To do that, Barron says, draw a line in the sand by knowing your five-year average cost of production and not being afraid to sell corn or soybeans when prices rise above that threshold.

“Be careful not to make that sale right in here [below the line in the sand] and then this market goes up here [above the line] and you get paralyzed because you’re convinced the market’s going to go higher,” Barron says. “Keep a good perspective on how we analyze the markets.”

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Comments

 
Spell Check

bulldawg
Greensburg, IN
5/9/2017 10:13 AM
 

  Nice job...but fighting human emotions is hard to break. Discipline is the obvious key, but seldom applied. Having another family member or hired associate maybe a solution if one can break the control ties. Farm wife's seem to be a good choice if they are willing as they are not emotionally attached to the crops especially in bear markets. But bull markets are for the guys who sit on their hands & do nothing, and are rewarded for their in-decisions. That is the most frustrating part for the discipline marketer.

 
 

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