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FARMERS' CORNER | |||
| "To Help The Producer Sell Better" | August 1996 1996 Number 7 |
|
FARMERS' CORNER | |||
| "To Help The Producer Sell Better" | August 1996 1996 Number 7 |
The biggest avoidable penalty facing farmers today is not selling early when prices are at profitable levels. In a year like this one, with historically high prices, this takes on even more meaning. Generally speaking, years of high prices are followed by several years of low prices. This means that those who miss out on profitable selling prices this year may not see any better opportunities in the next few years.
Besides missing out on higher prices, those who use storage or other after-harvest marketing alternatives suffer another penalty. Selling after harvest actually adds to their cost of production because they have to pay storage and interest charges. Any extra money they make by selling after harvest could be offset by these extra charges. In addition, they do not have the use of their money at harvest time.
History shows us that in most years, the best selling opportunities for fall crops are available during the several months before harvest. The producers who receive these better prices are the ones who have a plan: they use their costs of production and desired profit per acre to set a goal, and sell when that goal is reached.
Chances are, if you take the time right now to figure your cost of production and compare it to the prices available for new crop, you will find that these prices are more than adequate to cover your costs and provide you with a profitable return. Don't be penalized for not selling. Take Action Today!
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Good sales opportunities still exist at very profitable levels for 1996. We know it is hard to focus on the "big picture" when we are in the middle of a rally, but those that can stay focused are the ones who will be profitable every year. High prices are great for the farmer producing the crop but they present problems for the users; therefore, high prices will bring less demand and more production, bringing us back to lower prices.
Rallies like this do not just provide opportunities for one year. As futures prices for the current crop year rise, prices for deferred years go up along with them; this provides us with an opportunity that may not exist when the rally is over; the chance to sell two years' worth of crop s at profitable levels. Take a look at the prices that are available for '97. They may already meet or exceed your profit goal. The market is giving us a great opportunity to lock in a profit for at least two years.
The prices for '97 are not as high as the ones for this year, but there is a very good reason for that. Rallies are usually caused by problems with the crop. There is no way of telling right now whether there will be any problems with the '97 crops. Sure, there could be high prices two years in a row, but history tells us that years of high prices are usually followed by years of lower prices. Why take the chance of waiting until next year when a profitable sale is avalaible now. Come in or give us a call to find out how you can make a profitable sale and lock in the flexibility to participate in higher prices or protect yourself from non-delivery.
Successful marketers can see the big picture, recognize the opportunities and get grain sold at profitable prices. Opportunity is knocking. Don't ignore it. Take action and lock in profitable sales for this year and next.
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Another important part of your marketing program should be flexibility. If prices go higher, you should be able to participate. If you come up short on production, you need the comfort of not having to worry about large non-delivery penalties. Through the use of Minimum Price Contracts we can provide you as much flexibility as you want (there is a cost per bu.). The great advantage about these high prices is that you can afford the cost of flexibility and still lock in a very profitable price.
We can put together a plan that will suit your needs by building in as much flexibility as you like. We want you to be comfortable with your sales and be in a position to take advantage of higher prices or deal with non-production without worry. Don't hesitate. Come by our office or call for details on locking in profits with flexibility.
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When you sell using a Minimum Price Contract, you usually do it in a fairly large amount of bushels such as 5,000, 10,000, 20,000 or even higher. You might lock in you whole crop using this tool. We would like to remind you that you can price this contract in increments of 1,000 bushels or more anytime between the contract inception date and the expiration date. Of course, you also have the option to price it all at one time.
A good example of using smaller increments would be to price as your crop matured over time. Suppose you contracted 20,000 bushels of corn using a Minimum Price Contract on July 15, but wanted to wait until later to price your crop. Of course any pricing would only take place if prices went higher.
You might decide to divide crop into four segments and price at four different times as the crop progressed. Place an order to price 5,000 bushels on August 15, 5,000 on September 15, 5,000 on September 30 and hold the last 5,000 open until harvest. If crop expectations were still up in the air, you could cancel any of the orders up to the day before they were to take place.
This kind of plan would give you flexibility in case of smaller than expected yields, but also you could take advantage of higher prices if conditions were favorable and yields looked good.
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We retain:
10% of what we hear.
20% of what we see.
40% of what we discuss.
80% of what we experience.
Experience is the best teacher. This is a good year to experience profitable prices. We want to see you get into a habit of selling ahead at a profit. Our experience tells us the most successful marketers are the ones who consistently sell ahead at a profit year after year. They don't get flustered if prices go higher after they sell, they just sell some for the next harvest.
We can't predict the weather, the prices nor who will win the lottery next week. We can predict that many farmers will miss the opportunity for profitable prices because they have not experienced the success of selling ahead at a profit over several years. Make a commitment to yourself. Get in the habit of selling ahead for a profit. You will experience the results and feel good about it.
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Last year paid big dividends for holding grain. Prices moved up rapidly after harvest and reached all time highs. In the long run, however, this is not the right approach, especially after a high priced year like this one. It is traditional to put grain in bins at harvest and wait for price improvement, but the real success has been realized by those making sales now for the months following harvest. Using this approach, you can lock in a profit and assure that you will make some extra returns to pay for the bins you have invested in. You won't have to worry about prices going down and losing money.
We have two alternatives available to help you lock in a profit and a higher return on your investment. First, you can forward contract for any after harvest month. If you don't see the price posted on our board for the month you would like to deliver in, just ask us for a quote. We will be happy to give you a price for any after harvest delivery month. In the last week spreads from December to July have improved, allowing us to offer you more for your grain for after harvest delivery. Call us or come by for quotes. Second, we can tie in Minimum Price on all bushels or just part of them if you like; this will enable you to participate in higher prices if they occur after you sell. Don't delay. Prices are really profitable now.
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Signs of...Good marketing Habits
 Uses cost of production and
desired profit per acre to set a target price |
| Puts in an offer well before
harvest to sell when target price is reached |
| Sticks to target price and sells
as soon as it is available; doesn't change target |
| Uses Minimum Price Contracts
for flexibility in delivery and pricing. |
| If prices continue to rise after
selling, looks for opportunities to sell one or more future crop years |
| If profit goal is not reached by
harvest, sells grain at harvest using a Minimum Price Contract |
SIGNS OF POOR MARKETING HABITS
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It Is Hard...
But it pays! |