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Sometimes when bad things happen to good people, the natural response is to become stuck in the mud and feel frozen. People become unsure how to react, move, go on, exist. I write this as I think of the drought in the Midwest and how producers are still reeling in pain, emotionally and financially, from a devastated harvest.
Feeling as though their marketing plan has spiraled out of control, many producers throw up their arms and do not know what to do. Therefore, they do nothing. One look at the Palmer Drought Index Map reveals there is a high level of red and dark red throughout much of the Midwest, especially in the western Plains, Midwest and South. As we talk with producers in these regions, the primary concern is the lack of significant subsoil conditions. Without moisture soon, it will take timely rains in the year ahead to produce an average crop.
Despite this bullish price outlook, producers recognize that prices for next year are at a point to at least start making sales. So what to do?
Most of us like to have good information to make decisions. A lack of information leads to complacency. Furthermore, waiting for information (or the market to move enough to fit your bias) could prove detrimental. As grain and soy prices have slid over the last couple of months, many producers are on the sidelines waiting… for something. Conversations seem to go along the lines of, "We'll wait and see what happens in winter." The problem with that approach is that if the markets continue to slide, by mid-winter, producers may be waiting for a recovery to… you guessed it… prices that are right where the market is currently trading.
In recent years, many farmers who have sold ahead feel a sense of loss because prices moved higher. Yet, history indicates that, in most years, selling ahead is prudent. Complacency could pay big dividends or prove to be a disaster. Are you ready for those consequences?
2013 could be a critical make-or-break year for many. Tight supplies suggest high potential for a price recovery. Note that the key word is potential. Projected big supplies by fall could suggest significantly lower prices. As you plan for 2013, be prepared for prices to move in any direction. A big crop suggests much lower value than currently offered. Or, weather could drive prices to new highs.
Implementing a disciplined, strategic approach to marketing minimizes risks and takes the emotion out of marketing in a year like this. It is more than just assigning some arbitrary numbers to yield or usage. As I’ve advocated before, a process like Market Scenario PlanningSM prepares you for whatever the weather – or the market – dishes out. If and when prices move, regardless of direction, you already have a strategy in place and additional plans to execute further strategy. You are ready!
Ultimately, your goal is not to make one or two winning decisions. It is to build an average price over time so that if prices are weak into harvest, you're positioned above what the market is offering. In addition, you are positioned so that should prices rally on smaller crops, you can capture the majority of the rally. Meet uncertainty with balance, strategy and discipline, and gain control once again.
Market Scenario PlanningSM is a service mark of Stewart-Peterson Inc.
The data contained herein is believed to be drawn from reliable sources but cannot be guaranteed. Neither the information presented, nor any opinions expressed constitute a solicitation of the purchase or sale of any commodity. Those individuals acting on this information are responsible for their own actions. Commodity trading may not be suitable for all recipients of this report. Futures trading involves risk of loss and should be carefully considered before investing. Past performance may not be indicative of future results. Any reproduction, republication or other use of the information and thoughts expressed herein, without the express written permission of Stewart-Peterson Inc., is strictly prohibited. Copyright 2013 Stewart-Peterson Inc. All rights reserved.