Each year a farmer works hard to get his or her operation ready. As they prepare for the year, there is a long checklist of items they have to complete. From planting intentions to inspecting all the equipment; but they can’t forget to develop a marketing plan. This marketing plan will help them be prepared to capture opportunities as they present themselves.
We’ve all heard the sayings “Hindsight is 20/20” and “Past performance isn’t always indicative of future results”. This is the third year in a row we saw tight grain cash flows in the winter and spring, only to see markets rally in the late spring to early summer and then a sharp decline during the summer months. All 3 years had different reasons for these market moves, however it has provided opportunities for many grain producers. Now these opportunities had to be defined prior to them being recognized. Once an opportunity is defined a producer can develop a marketing plan. Each year it seems like the period of time to capture these has been shortened.
Also for the last three years, we have seen weather provide movement in the market. As we get further into the season and closer to crop maturity, the market tends to correct itself. With many snow storms in April we had a later spring than most wanted to see. However, May and June proved this year that heat and moisture can motivate this crop to faster maturity. Add the “Trade talks” to the fast maturing healthy crop and we see the influence in the market.
Now as we start small grain harvest and move closer to maturity for all crops, we see the supply & demand charts start to influence this market as well. The last few years we know there is supply; the question is what will demand do? With all the trade talk lately, the demand side is definitely a concern and is one of the major issues influencing our current market.
To combat the effect of the new tariffs, the Trump administration announced an estimated $12 billion government assistance program. The program has a three pronged approach which includes direct farmer payments. I don’t know all the details yet, but we’re hoping to have more details out around Labor Day weekend.
What I have heard is there will be a multiplier used times your 2018 production produced for soybeans, corn, wheat, sorghum, cotton, dairy and pork. I hope to have much more detail for my Big Iron presentation in September.
Low prices can certainly be a challenge, but one thing we can be a little thankful for is the increase in volatility means we’ve had more chances to sell at profitable levels. The key to taking advantage of those levels is: first, knowing what your breakeven is, and second, having the will to pull the trigger. The second is often the more challenging because it usually involves selling into an “up” market and going against your emotional involvement.
Overcoming that challenge has a few different issues, but the best thing we can do is to have working orders at the local elevator. That way, the decision is already made by the time prices meet our objectives.
