When profit margins get thin (or disappear) we tend to focus more on markets and marketing as a way to generate profits.
Unfortunately, we can only take the price offered and in some cases this price does not meet our expectations. The challenge then becomes – “What do we do?”
I was able to participate in the 2016 Commodity Classic™ the first week of March. As I am not much of an agronomist my focus was the marketing and management sessions. From my time with the folks that are respected enough nationally to be included as speakers at the Commodity Classic™ I took a few notes. These notes and my interpretation are shared here.
During one of the grain marketing panel discussions Ed Ussett, University of Minnesota told us every year since 1973 there has been at least one chance to price grain at a profit. However, the challenge might be to pull the trigger when this opportunity appears. Ed suggested grain marketers consider being aggressive when / if profitable prices were available. He also encouraged marketers to be flexible in their use of pricing tools. Some of our flexible tools are hedges and options as they are paper trades that can be offset should evolving market conditions warrant.
I did not hear any of the speakers over the three days of this educational event suggest they are expecting a burst of demand to rescue old crop prices. The 2015 bushels are known with some certainty and the accompanying demand has shown little sign of rising dramatically enough to more fully absorb near record 2015 global production.
As we focus more and more on 2016 marketing we can at least hope for increased demand. The other part of the price puzzle is supply. Some are exploring historical weather trends when switching from a strong El Nino to a La Nina as this could be the set up at this time. However, predicting long term weather can be as reliable as predicting long term prices. Our expert speakers in New Orleans reminded us that a weather scare does not necessarily result in lower yield. We typically expect at least one or two weather scares at the critical planting and pollination times and may want to take advantage of a price spike(s) should they materialize.
The grain marketing speakers also told the farmers present to go ahead and worry – that’s the manager’s job. However, we should not doubt ourselves and our abilities.
One final piece of my notes from this international event again is credited to Ed Ussett. Ed summarized his comments with an observation that over the previous 26 years the April-May-June time frame had the high marketing year price 80% of the time.
Many of us will get fairly busy with some major activities soon. Penn State Extension is again co-hosting an excellent early summer break. The evening of June 21st you are invited to enjoy our annual Pig Roast Grain Marketing event. This excellent opportunity to relax, enjoy some fellowship, and learn is greatly enhanced by a wonderful meal.
(Source – http://www.farms.com/news/grain-marketing-update-106192.aspx)