“I have a gut feeling that the market’s going to keep going higher, so I’m not going to do anything.”
I’ve heard that phrase countless times, 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.’ The key to successful marketing in these fast-moving markets is creating a structured plan for marketing bushels, and sticking to it. Some producers may be 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.” 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?
Having a Structured Ag Marketing Plan is Crucial
A structured marketing plan is not a cookie cutter formula and won’t necessarily look the same for everyone. Plans often vary from producer to producer depending on their specific situation. But why is it so important to have a personalized ag marketing plan? Well, let’s take a look at these past few months in the corn market to paint a clearer picture. Back in June, the price of December corn crested $4.50 at one point. In addition to that, the price spent two plus months above the $4.20 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 $4.20. I completely understand that it’s easy to get starry eyed when prices start running higher, but it’s important to take a step back and logically assess the situation. Your initial reaction to that might be that it’s easier said than done. In reality, it’s much easier than it sounds when you have a structured marketing plan that you trust.
Developing Your Own Ag Marketing Plan
I know I’ve done a lot of talking about how you need a structured ag marketing 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. If you don’t know what the cost of production formula is and how to calculate it for your operation, I’ve written this blog article to get you up to speed. Once you know your cost of production, you’ll know exactly where you need to make sales to be profitable. From there, you can start picking target prices around that number where you’ll either sell bushels or protect that price with a hedge. If protecting a price with a hedge is a new concept to you, I’ve covered the specifics of how and why you should in this blog article.
Once you have a clear understanding of your cost of production and how exactly a hedge can pair with your cash sales, then it’s a simple matter of deciding when to make a cash sale or when to protect price with a hedge. You can also determine when there may be an opportunity to re-own bushels after you make a sale and how that can tie in with your sales and hedges.
We’re Here to Help: Create Your Own Plan with One of Our Experts
If this all seems a little overwhelming, just remember this is exactly what we’re here to help with at Daniels Trading. At the end of the day, having a structured plan can help make some of those difficult decisions a little bit easier. Reach out to a member of our team or complete our short survey to start putting that structured plan together.