Keeping an Open Mind

Wednesday, June 19, 2013

        Over the past two years I have had the privilege to travel across the Midwest and Northeast talking to farmers and providing market outlooks. My travels and speaking engagements have always brought one particular question, ” are you bullish or bearish this market?”. From a Risk Management standpoint fitting into the Bull or Bear category can become costly. I have learned, especially after this past year, that we must be careful in examining all risks and look for profitable opportunities to make sales.

        With today’s volatility the market can change quickly and have a totally different tone from one day to the next. In some cases, one topic can change the market multiple times in one week. Perfect example of this is South American weather. This news can move a market 20 cents higher or 20 cents lower, depending on the forecast. Volatility is here to stay, and as sellers we need to recognize that and have a plan in place to take advantage of these spikes.

        At the surface a story can be bearish or bullish, but do not fall into the trap of just being bearish or bullish. That is when we lose good opportunities to make profitable sales.

          Remember there are two sides to every coin, and when managing your price risk, a farmer has to look at the information available and be prepared to make a profitable sale. Try to not get caught up strongly on one side, as our nature is to only look at stories that match that side. In making good price risk management decisions for your operation you must be able to openly see all sides and possibilities. Remember that an educated, profitable sale keeps the equipment rolling. There are many tools out there to lock in prices. Talk to someone you trust and are comfortable with, when thinking about using these products. The more knowledgeable you are, the better seller you can become.
        With news trending to the bearish side for the 2013 crop year, it is good to start looking at managing your down side risk. However, remember that there will likely be spikes in the market as fresh news hits. These short term spikes might provide the seller an opportunity. Do not fall into a strong bias one direction or the other. A single “bull or bear” mindset can become hindering to your marketing strategy. It is important to keep an open mind and be prepared to make small increment sales at profitable levels. Have a plan ready going into this marketing 2013 marketing year and be prepared to execute it when the time comes.