Overpower Market Clutter

Overpower Market Clutter

There’s no question emotions can seep into your marketing plan and throw it entirely off course. What sounded logical on paper this past winter can seem invalid as heavy spring rains suffocate emerging crops or China routes back ships of grain.

All of these headlines and resulting knee-jerk reactions can cause spikes in the markets, but they also can create major distractions.

“Emotion and common sense are usually dead opposites,” says Chip Flory, Pro Farmer editorial director and host of “Market Rally” radio program. “Marketing emotions are driven by greed and fear; common sense is driven by reason.”

How do you decide what information to factor into your plan and what information to ignore?

“It’s really difficult,” says Angie Setzer, vice president of grain, Citizens LLC. “More information does not equate to better marketing, and there’s a fine line between too much information and making sure you are aware of what is going on.”

When events such as avian flu or a Brazilian drought consume headlines and Twitter feeds, Setzer suggests evaluating the staying power of that news item. Ask yourself: Will this be important in six months? Three months? Next month? Next week?

“This process will help you get a feel for what’s important and what isn’t,” she says. “Otherwise, you will get bogged down with tiny specks of information that aren’t really drivers. The guy who knows the corn production number for all the South American countries has a hard time marketing.”

“Facts and psychology affect trading, but mostly the latter,” explains Alan Brugler, president, Brugler Marketing & Management. Logic traps in grain and livestock marketing include everything from backyarditis to Twitter panic to coffee shop syndrome.

“People generalize what they are seeing around them and assume that’s what is happening in the rest of the world,” Brugler says. “But you can’t see even one millionth of the nation’s crop from your back door.”

Avoid Traps. To dodge pitfalls, Brugler says, you must develop a flexible but controlled marketing plan. “If you don’t have a marketing plan, you are planning to fail,” he says. “Disciplined traders have a plan based on analysis, with alternative outcomes and check points.”

Start your marketing plan with your cost of operating, Setzer suggests. “You need to have a baseline of what you need to get out of each crop,” she says. “Then you can think about what you’re looking for from an upside perspective versus downside in terms of price.”

Include both price and time components in your strategy. “Determine that you want a certain number of bushels out by a specific date,” she says. “This allows you to sell grain when you want to, not when you have to.”

This strategy also helps you stay active in the market. “Otherwise you can get out of touch if you aren’t making regular sales,” Setzer says. Although emotions are always at play in the market, you can curb them.

“You should minimize all feelings before trading,” Brugler says. “Strong feelings about a market will blind a trader to any realistic evaluation of it. The best trading emotion is the least.”

Be Objective. You also need to manage the unknowns in marketing. “With uncertainty, you either become overconfident or go into denial,” Brugler says. “Doing nothing is a legitimate marketing tool—it’s just way overused. Markets can remain illogical far longer than we can remain solvent.”

To overcome these obstacles, Brugler says, you must set goals. Then, you should mentally rehearse your plan to overcome performance anxiety. “Assume negative outcomes and detail how you can counter those,” he says. Also, find a way to manage the stress associated with trading. “If you can get it down to only money and you’re playing the game, you’ll be a lot better off,” Brugler points out.

Be aware of current market moves, regardless of whether you are actively marketing grain or not, Setzer says. “You need to find validated and curated sources of information to track,” she says.  

Follow at least one information source. “That doesn’t mean you should follow all their advice, but you should at least consider it when making your decisions,” Flory says. “Commodity advisers can get wrapped up in the emotion of a market, but that risk is much lower than trying to do it alone.”

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Spell Check

north, IA
9/9/2015 09:11 AM

  Who ever coined the phrase "greed" when associated with marketing commodities didn't seem to have a full appreciation of what the farm business is like. Who would really like to work at their job for a full year with no pay? This what we farmers are looking at this year. So naturally we try to make a double income in another year to make up for lost ground. Is this greed? If enough farmers go out of business the people who are left will coordinate their efforts and we will all be paying significantly higher prices for our food, is this what we want? Anything below parity is not greed in my book and I may be wrong but I don't even think we reached parity during the higher prices of a couple of years ago. My feelings wouldn't be hurt if I never heard the term greed used again when associated with commodities marketing,

Rational Farmer
Waterloo, IA
9/9/2015 09:59 AM

  Excellent quote by Brugler: "Markets can remain illogical far longer than we can remain solvent."

Chappell, NE
9/9/2015 07:50 AM

  Livelihoods will never be a game.


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