Being an agricultural producer is without a doubt one of the most interesting occupations one can enter into, and it has evolved over the years from a way of life to a business. In years past, a producer could very well survive and be successful by being a jack-of-all-trades. This served you very well as many people raised their families and taught them just how to work hard and be successful. What a great life this was and still is, as all of you teach your children and grandchildren these very beneficial life lessons.
However, the industry has changed, and it would be very easy to ease into the category of a jack-of-all-trades and master of none. We all have different talents as well as different interests. In many businesses, the management attempts to place employees into positions where they are able to thrive and move the company forward. This isn’t always possible in your specific operation, as many of you have responsibilities you like and many others you don’t.
For example, how many of you love doing the accounting for your business? Those of you who love the accounting side of the operation just may not be all that interested in agronomy. Or it may be that you like raising wheat, while another likes raising potatoes and another likes hay or another commodity.
I guess I have just taken the long way around to get to marketing. But in most cases, the person in charge of marketing for your operation may not be all that interested in studying the markets and making decisions on what the market is telling them to do. For instance, what could you do if the local basis strengthened 20 or 30 cents in a week? (Trust me, it has done this at times in the past.) Remember, the basis is the best indicator of your local supply and demand.
The rule of thumb is that as soon as the buyer has contracted their needs, the basis will weaken. At this time, we can either feel good about contracting or not so good about not taking advantage of the move in the market. This is why it is so important to know the reason the cash price moved higher. Was it futures, basis or a combination of the two? Should I take advantage of this strength, and if so, just what can I do?
With the volatility in the markets over the past couple of years, it is important to have your marketing plan in place ahead of time and then stick to the plan. Your plan will be different every marketing year and should be made by decisions not based on emotions. Believe me when I say I have made many emotional decisions in marketing – and without fail, they have come back to haunt me.
Let’s always take a look at the historical futures trends. Then the question should be: Are we following the trend or not, and these may not just be long-term trends but also, let’s say, 30-day historical trends. And let’s always, always, always keep a close eye on your local basis.
Most of you keep a close eye on your crops during the growing season. You at least drive by your fields to make sure the water is running, and many will change the water during the day as well as check the overall condition of the crop. Do you do the same with the markets? Do you check on them daily? Do you see how your marketing plan is performing? Is the market getting close to some of your target levels? With the possibility of the markets continuing their volatility over the next year, you may lose some if not many of your opportunities to contract by only watching the market once or twice a week.
I know you have a lot going on in your life every day. But, in my opinion, watching and studying the markets for at least a few minutes every day is just as important as the other areas of your operation. It may not be as exciting, but it is just as important.
