Sell Early and Sell Often
What’s Happened…
Marketing decisions are often made with little certainty as to what lies ahead for price movement. In most years, if good crops are produced, it is likely prices will be lower by late summer or early fall, as bigger supplies are anticipated. Knowing when to sell (especially if making only a few sales) can be challenging and often requires acute attention to market signals. Even with that, the fewer sales one makes increases the potential for extreme results, good and bad.
To work around the potential imbalance of making a few large sales is to make smaller and more frequent sales. It is often said that getting started can be the hardest part, whether it is marketing decisions, exercising, or anything in life. From a marketing perspective, getting those first sales in the books can make it easier to continue to make additional sales. Historically, corn, soybeans, and wheat prices four to eight months prior to harvest may offer a better selling opportunity than at harvest.
Why this is Important…
First sales can act like a pivot point. That is, once a sale is made, and if prices rally, making additional sales can result in a higher average price. If prices drop and the trend turns lower, those initial sales can act like a pully and help pull up your average price. What is critical, however, is getting the ball rolling and making enough sales that matter. A series of smaller sales can add up. Over the last decade, there have been multiple times when the market has rallied and then quickly capitulates. If you were not rewarding the rally with sales as prices were trending higher, making enough sales in a rapidly declining price environment can be a big challenge. For many, when prices start to drop, the mindset moves to wait–and–see. Unfortunately, there are times when prices do not recover.
What can you do about it?
Consider two approaches. One approach is to make incremental sales via the calendar. Selling by the calendar means making smaller sales (say 10%) over a time window. You might have a parameter that if prices drop below a certain level, then this selling stops. A second approach is to set predetermined price levels. If prices rally, certain sales are triggered. A combination of the calendar and predetermined price levels may also work for you. However, if sales are made on a price advance, then you may need to reduce the number of calendar sale dates and vice versa.
Find out what works for you…
Work with a professional to find the strategy or strategies that are best suited for your operation. Communication is important. Ask critical questions and garner a full comprehension of consequences and potential rewards before executing. The idea is to make good decisions for the operation and less emotionally charged responses to market moves, which are always dynamic.
About the Author: With the wisdom of 30 years at Total Farm Marketing and a following across the Grain Belt, Bryan Doherty is deeply passionate about his clients, their success, and long-term, fruitful relationships. As a senior market advisor and vice president of brokerage solutions, Doherty lives and breathes farm marketing. He has an in-depth understanding of the tools and markets, listens, and communicates with intent and clarity to ensure clients are comfortable with the decisions.
The data contained herein is believed to be drawn from reliable sources but cannot be guaranteed. Individuals acting on this information are responsible for their own actions. Commodity trading may not be suitable for all recipients of this report. Futures and options trading involve significant risk of loss and may not be suitable for everyone. Therefore, carefully consider whether such trading is suitable for you in light of your financial condition. Examples of seasonal price moves or extreme market conditions are not meant to imply that such moves or conditions are common occurrences or likely to occur. Futures prices have already factored in the seasonal aspects of supply and demand. No representation is being made that scenario planning, strategy or discipline will guarantee success or profits. Any decisions you may make to buy, sell or hold a futures or options position on such research are entirely your own and not in any way deemed to be endorsed by or attributed to Total Farm Marketing. Total Farm Marketing and TFM refer to Stewart-Peterson Group Inc., Stewart-Peterson Inc., and SP Risk Services LLC. Stewart-Peterson Group Inc. is registered with the Commodity Futures Trading Commission (CFTC) as an introducing broker and is a member of National Futures Association. SP Risk Services, LLC is an insurance agency and an equal opportunity provider. Stewart-Peterson Inc. is a publishing company. A customer may have relationships with all three companies. SP Risk Services LLC and Stewart-Peterson Inc. are wholly owned by Stewart-Peterson Group Inc. unless otherwise noted, services referenced are services of Stewart-Peterson Group Inc. Presented for solicitation.
Author
Bryan Doherty