Price management isn’t madness

Published on: 10:04AM May 07, 2014

This spring’s NCAA March Madness tournament was filled with even more madness this year thanks to one of the wealthiest men on the planet, Warren Buffet. Buffet offered $1 billion to anyone who could correctly pick the winners of all 63 games in the tournament – a perfect bracket.

Fifteen million would-be billionaires were out of the running after just the first two rounds. How can it be that not one out of 15 million people got all 63 games correct?

Reports show a devoted college basketball fan’s probability of completing a perfect bracket is a modest one in 128 billion. For the average person not following Division 1 basketball’s every move, the number is even more staggering.

Buffet understands there’s no such thing as perfection when attempting to guess outcomes in something over which you have no control. He doesn’t seek perfection in his business. Rather, he looks for good opportunities, and he takes a long-term view when measuring success.

It’s not a good habit to look for perfection when selling your production. By this I mean attempting to hit the market tops or holding out in hopes of capturing a price that has come and gone. The real prize is in pre-planning pricing strategies with an eye toward earning a strong average price over time.

Buffet did his homework before risking a billion dollars. You should, too, before making sales on your hard-earned production. Following are four market factors to watch when planning to capture price opportunities and protect against risks in 2014.

  1. Demand Renewal. History shows when corn prices drop 50 percent, as they did from summer high of 2012 to the January low of 2014, demand recovers, leading to higher prices.
  2. Export Commitments. Since 1990 there have only been four times where export commitments have been stronger than they are right now. Over the past 5 years, China has been a large importer of US corn. Prior to 2008, China had been a net exporter of corn.
  3. U.S. Dollar. The dollar can have a significant effect on price, so it pays to watch it. Currently, the U.S. dollar is in a pennant formation. When a market breaks out of a pennant, a sharp move typically follows. A breakout higher could crush demand for exports, sending corn prices lower. If the U.S. economy begins to slow, the U.S. dollar could weaken and corn prices could rally further.
  4. U.S. Ethanol Production. Historically, there is a direct correlation between corn prices and ethanol production.  Ethanol prices and margins remain strong, which implies demand for corn should remain firm.


The biggest risk you face is complacency. In fact, the most risk can lie in doing nothing. If you need a boost to get started, there’s a special report we developed that can help. It’s called Be on Your Toes. You’ll find more detail around the four market indicators above. And, it offers suggestions for what you can be doing right now to take advantage of an increase in prices in the near term and be protected against the risk of a lower corn price this fall.

Download a free copy at


Scott Stewart is CEO of Stewart-Peterson Inc., a commodity price management  firm based in West Bend, Wis. You may reach Scott at 800-334-9779, email him at [email protected]

The data contained herein is believed to be drawn from reliable sources but cannot be guaranteed. Neither the information presented, nor any opinions expressed constitute a solicitation of the purchase or sale of any commodity. Those individuals acting on this information are responsible for their own actions. Commodity trading may not be suitable for all recipients of this report. Futures trading involves risk of loss and should be carefully considered before investing. Past performance may not be indicative of future results. Any reproduction, republication or other use of the information and thoughts expressed herein, without the express written permission of Stewart-Peterson Inc., is strictly prohibited. Copyright 2014 Stewart-Peterson Inc. All rights reserved.