Strategy or Procrastination?
Apr 13, 2016
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I’m concerned with the paralysis many farmers share in 2016. There are so many ways to “kick the can” when making marketing decisions. I want to share how and why this is happening.
Grain bins. Grain is in storage from 2015 and even further back. It’s very easy to put it in there, but not seeming as easy to take out this year—especially for those with the cash flow to wait it out. Cash flow is either from a strong financial position or something like a CCC loan. It’s not only on-farm grain storage, but possibly on a deferred pricing type of contract. Sometimes elevators pay a percentage up front, helping with money.
Small sales. It’s easy to pull the trigger on a small volume, but how much you sell is just as important as when you sell it. I am willing to bet many producers have sold some beans on the recent rally, but how much is in question.
Weather memories. Let’s look back to 2012. The drought increased corn and soybean prices by more than 20%. No one has forgotten—especially those that panicked when they sold too early or had to buy out of elevator contracts. This is a new year, but it’s hard for many to let go of a year in which inaction was rewarding.
Upcoming weather forecasts. Like any year, we could see a weather issue. This year, more specifically, is said to bring more heat and less rain. It’s easy to believe what you want to believe, and a bullish weather forecast is a very popular notion. Granted you don’t want a drought in your area, it’s a way prices could rally much like 2012. Obviously, no one wants to sell if the prices will rally, so they wait.
Below break-even prices. It’s tough to sell if you’re locking in a loss. Even though everyone knows the market doesn’t care what price you need, it’s still hard accept the reality. When pricing, I fear many view it like we’re embracing the loss instead of limiting the loss.
It’s always hard to make a decision and even harder with the financial worry out there. You can easily become paralyzed by emotion—especially with so many ways to procrastinate. Yes, sometimes waiting is a strategy rather than an indecision, but know the difference! It all comes down to whether we want to protect the downside risk with the possibility of giving up some on the upside. We have to look at the facts we know. Consider the unknown too, but with less weight.
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