Most producers don’t hedge, but Dave Fogel of Advance Trading thinks they will eventually.
“Hedging to me means I have limited risk,” Fogel explained during a breakout at the 2015 Top Producer Seminar. “When you wake up in the morning, you should be OK with price no matter what happens.”
Grain elevators already understand the principle and often are required to hedge under state law. That’s reflected by the fact elevators don’t care how the price of corn moves, Fogel notes.
(Click here for a complete copy of Fogel’s presentation.)
He recalls farmers in the past who became nervous after someone forecast $2.75 December corn futures at harvest. At the 2015 Top Producer Seminar, Fogel says, he’s heard analysts predict $6 corn and sub-$3 corn.
“I’ll bet you one of those guys is going to be wrong,” Fogel cautions. If someone forecasts prices, he says, ask for the past 10 years of their trading statements.
Alternatively, producers can identify experts who can help them navigate and manage risk.
“It’s about protecting your bushels, it’s not about predicting,” Fogel says.
How to Hedge. Fogel joined Advance Trading amid the farm crisis of the 1980s. He recalls the challenges producers faced, followed by the high prices of 2008 to 2012. It’s impossible to know whether those good times will return, so farmers need to prepare accordingly.
“It’s very, very possible to grind out a good profit every year,” Fogel notes. That was true even in the days of $2-per-bushel corn.
Plenty of obstacles exist to implementing a strong marketing plan, though. There are dangers in becoming too bearish with a marketing plan, or making knee-jerk sales, Fogel says.
Instead, producers should take the following steps to hedge effectively:
- Understand how marketing tools work.
- Use crop insurance
- Learn about cash markets and sales
To read more news and find additional information on the Top Producer Seminar or Tomorrow’s Top Producer events, visit www.TopProducerSeminar.com.
Thank you to the 2015 Top Producer Seminar sponsors:
Premier Sponsors: Advance Trading, Apache Sprayers, BASF, Bayer CropScience, Cargill, Case IH, Dow AgroSciences, DuPont Pioneer, ESN, Farmers Business Network, Firestone, John Deere, New Holland, Top Third Ag Marketing, Verdesian
Co-Sponsors: CliftonLarsonAllen, Conservis, The Gulke Group, K-Coe Isom, Soybean Premiums, Wyffels Hybrids
Supporting Sponsors: FarmLink