Hope is a poor marketing strategy

first_imgShare Facebook Twitter Google + LinkedIn Pinterest The market feels like it is in free-fall and the lack of strong exports is discouraging. One silver-lining, as futures continue to drop, export demand may eventually increase. World grain supplies are still high, which could keep a cap on prices for a long time. It will likely take a supply disruption to change the course dramatically.Rumors indicate the Chinese government may drop domestic corn subsidies and pay farmers direct instead. This may lower corn prices and make China imports more difficult. However, China will still need the same amount of grain, regardless if it is domestic or imported. So, the impact of this on the market is uncertain. When will the corn low be in place?‪In the last 40 years, the year’s low was in Sep/Oct 12% of the time (Sep three years/Oct two years) and in Nov/Dec 30% of the time. Many farmers still have old crop and are hoping for a small run up before harvest. The market drifted lower all of September only to rally in October, it may happen again this year.Early yield reports are lower than some expected, but the worst performing corn appears to be maturing quicker and is located in the states that didn’t have the best growing conditions for the year. As harvest progresses north it should improve greatly. Hope = Risk‪How often do you hear a farmer say “I hope the market goes back up and then I will sell”? We all have had this thought. The thing is, hope is not a marketing strategy. Hoping the market will go back up to $4.50 on corn and waiting for it to happen, despite unlikely reasons for it to do so, is not a strong marketing strategy. In fact, it is risky. Ask a farmer who did not sell the remainder of their 2014 corn crop on the July rally. Those farmers had the opportunity for $4.50 but “hoped” for $4.75. They might be taking $3.75 today.A strong marketing plan is based upon knowing your breakeven points and determining price goals. You can base it upon market conditions, but I advise my clients to set a base-line price goal to sell a set percentage of their crop. Then if prices increase, continue to sell a percentage of their crop incrementally. I also encourage everyone to write their price goal down in advance. This can help discourage farmers from waiting, “hoping” prices will continue to increase after reaching their goals.‪Having a plan in place enables farmers to take advantage of key opportunities throughout the year. It also minimizes the use of hope as a strategy.Jon grew up raising corn and soybeans on a farm near Beatrice, NE. Upon graduation from The University of Nebraska in Lincoln, he became a grain merchandiser and has been trading corn, soybeans and other grains for the last 18 years, building relationships with end-users in the process. After successfully marketing his father’s grain and getting his MBA, 10 years ago he started helping farmer clients market their grain based upon his principals of farmer education, reducing risk, understanding storage potential and using basis strategy to maximize individual farm operation profits. A big believer in farmer education of futures trading, Jon writes a weekly commentary to farmers interested in learning more and growing their farm operations.Trading of futures, options, swaps and other derivatives is risky and is not suitable for all persons. All of these investment products are leveraged, and you can lose more than your initial deposit. Each investment product is offered only to and from jurisdictions where solicitation and sale are lawful, and in accordance with applicable laws and regulations in such jurisdiction. The information provided here should not be relied upon as a substitute for independent research before making your investment decisions. Superior Feed Ingredients, LLC is merely providing this information for your general information and the information does not take into account any particular individual’s investment objectives, financial situation, or needs. All investors should obtain advice based on their unique situation before making any investment decision. The contents of this communication and any attachments are for informational purposes only and under no circumstances should they be construed as an offer to buy or sell, or a solicitation to buy or sell any future, option, swap or other derivative. The sources for the information and any opinions in this communication are believed to be reliable, but Superior Feed Ingredients, LLC does not warrant or guarantee the accuracy of such information or opinions. Superior Feed Ingredients, LLC and its principals and employees may take positions different from any positions described in this communication. Past results are not necessarily indicative of future results. He can be contacted at [email protected]last_img

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