TOP FARMER WEEKLY PERSPECTIVE 6/18/2021 BY BRYAN DOHERTY

Anchor or Pulley

When it comes to marketing, do you view sales with anxiety and regret? Are you constantly looking back at past decisions and second guessing? If this describes you, you are probably in good company and like most farmers. After all, if you sell today and prices are down tomorrow, you did not sell enough. If prices are higher, you should not have sold anything.  You are only human and part of being human is emotion. When decisions are made, people will question themselves. Rare is the person who can make a marketing decision and not look back. To help tame the emotion, strive to gain a knowledge of multiple marketing tools and make sure you are viewing your sales from the right perspective. The old saying, “knowledge is powerful” does have a hard ring of truth to it. Here are three steps to move toward making decisions with confidence rather than anxiety.

Perspective: This is perhaps the most important. When making sales, view it as building an average price. Each sale acts as a pulley, distancing prices from the current market low.  The alternative is viewing sales as an anchor from what “could have been,” if you were able to sell all your production at the top. With that mindset, you will always feel defeated. The pulley theory is a constructive mindset to incorporate and will help make each decision easier.

Marketing Tools: Understand the marketing tools available to you. Learn about the services offered by your local elevator. Consider working with an advisor who can guide you in your marketing decisions. Not everyone is created equal, and not all farm operations are the same. One tool does not necessarily fit everyone. A working knowledge of the marketing tools available to you is critical so you can use the right tool for the right situation. As an example, let’s say you have reached the maximum number of bushels you wish to forward sell. What about the remainder? Doing nothing is a choice (still a decision). You could also use futures, puts, or a combination. What about retaining ownership of sold bushels with call options? There is a lot here. A suggestion is to work with an advisor that can help you achieve your goals.

Value: Market your first sales based on the value proposition. What is the value proposition? Simply, it is selling a percentage of expected crop (you pick the comfort zone of how much you are willing to sell in advance) so that, regardless of where the market goes, you are content. Another way to look at it is, making sales that are highly likely to be profitable for the operation. You need to get started somewhere. Why not start when you are offered an opportunity to sell in the black? This brings us back to the pulley theory. If the first sales make financial sense, then the next sales at a higher level continue to help pull the average higher.

Adopt a constructive perspective.  Learn the tools available to you and when to use them – their risks and rewards. Be proactive to avoid feeling you missed the opportunity. Seek help. Watch your average price. If you have comments, questions, or suggestions, contact Bryan Doherty at Total Farm Marketing. You can reach him at 1-800-334-9779, extension 300.

Futures trading is not for everyone. The risk of loss in trading is substantial. Therefore, carefully consider whether such trading is suitable for you in light of your financial condition. Past performance is not necessarily indicative of future results.

Author

Bryan Doherty