“I have a gut feeling that the market’s going to keep going higher, so I’m not going to do anything”. That’s a phrase I’ve heard many a time, and it always makes me cringe. Don’t get me wrong, I’m all for optimism and keeping a positive outlook. However, I’m very much against risking your livelihood on a ‘gut feeling’. What am I trying to say? I’m saying that the key to being successful with your marketing in these fast moving markets is to have a structured plan for marketing bushels, and sticking to it. I can hear it now, some producers saying, “I’ve been doing my own thing without a plan for this long and it’s always worked out, so I’m not going to change”. Well if that’s the thought you have, then I’d ask you to take a serious look back at years past and ask yourself, did it really work out for me as well as it could have?
If you haven’t realized it thus far into this article, then let me reiterate, I think it’s crucial to have a structured marketing plan.
Now when I say that, it doesn’t have to be the same for each producer, and most times, it does vary slightly from one person to the next. Why is it so important? Well let’s look at these past few months in the soybean market to paint a clear picture. Back in May, the price of November soybeans crested $10.50 at one point. In addition to that, the price spent three plus months above the $10.00 mark. Most everyone I talked to sold some up at that level, but still held a good portion unpriced and unprotected. These were some of the same people that, mere months beforehand, said they’d sell everything above $10.00. I completely understand that it’s easy to get starry eyed when prices start running higher, but you have to be able to take a step back and logically assess the situation. I know what you’re probably saying to me right now, which is, “Jake, that’s much harder than you make it sound”. And my response to that is, no, it’s really not that hard when you have a structured plan that you trust.
Yes, yes, I know, I’ve done a lot of talking about how you need a structured plan, but I haven’t talked at all about how to make this structured plan. Well let me dive into that. First and foremost, the plan starts with your cost of production. Now, hopefully everybody knows what cost of production is and how to calculate it for your operation, but if not, then I’d advise you to read through this blog article to learn more about that. Once you have that number, you know where you need to make sales to be profitable, and you can start picking targets around that number where you’ll either sell bushels or protect that price with a hedge. I’m not going to go into details on how to protect a price with a hedge in this article, but if you’d like to read more about the specifics of that, then just read through this blog article to get a clearer picture.
Once you have that understanding of your cost of production and how exactly a hedge can pair with your cash sales, then it just comes down to deciding when to make a cash sale or when to protect price with a hedge. You can also determine when might be a time to re-own bushels after you make a sale and how that can tie in with your sales and hedges. If that all seems a little overwhelming, then just remember that that’s exactly what we’re here to help with at Daniels Trading. Anybody is welcome to reach out to us to assist you with putting that structured plan together. At the end of the day, having a structured plan can help make some of those difficult decisions a little bit easier.
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