Farmers' Corner January Issue Index

In olden days, before we had harnessed electricity, and before there were any such modern conveniences as ship-to-shore radio, radar, and the Global Positioning System, sailors still had to find a way to navigate across huge stretches of ocean to get their cargo from one port to another.

They did have use of a compass, which told them where they were going, but the problem was that they had no way of telling exactly where they were. As a result, many a ship was lost at sea, and it was not uncommmon for ships that did make it to land to be very far away from their intended destination.

Sailors tried all kinds of schemes, ranging from the ridiculous to the ingenious. Finally, after years of effort, someone realized that the sky was the key to their problems. If sailors had a way to measure the positions and angles of various stars, they could very precisely determine their latitude and longitude, so they would know exactly where they were at any time. The scientific minds of that era wasted no time in beginning to develop such an instrument.

After a few years of testing, reworking, and improving, an instrument called the sextant was developed.

This invention revolutionized the art of sailing. Now sailors could always tell exactly where they were and exactly where they were going. Once they had mastered the use of these instruments, they could embark on any voyage with much more confidence that they would reach their destination.

Imagine the life of a sailor before the invention of the sextant. The compass gave him some idea of where he was going, but he didn't know where he would end up because he didn't know where he was. It must have been an incredible feeling to leave on a voyage for the first time without having to worry about getting lost, because you would know exactly where you were and where you were headed at any given time.

The introduction of just one relatively simple instrument forever changed the art of sailing. It replaced fear and uncertainty with confidence and peace. Now, instead of navigating by guesswork, they were given the means to control the course of their voyage.

It isn't very difficult to figure out the moral of this story. To reach any goal, you have to know two things; where you are and where you're going.

Find Out Where You Are

In marine navigation, finding out where you are means determining your latititude and longitude so you can find your location on a map. In farming, it's a little different.

The whole point of being in farming or any other business is to make a profit by producing some good or service and selling it for more than it cost you to make it. Knowing where you are means knowing how much your costs of production are.

Old-time sailors used a sextant to find out where they were. Modern day farmers can use a worksheet like this one.

Production Costs Per Acre

Crop: ________

FERTILIZER & NITROGEN

SEED

HERBICIDE

INSECTICIDE/FUNGICIDE

LAND PREPARATION

PLANTING/CULTIVATING/HARVESTING

LAND RENT

HAULING

DRYING

PRICE INSURANCE

INTEREST

OTHER

TOTAL

______

Note: Compute total costs and divide by number of acres to identify cost per acre. Fill in your own costs and be sure to include any costs not listed here.

After you have carefully computed your costs per acre, you will know where you are. Spend plenty of time on this step. If you get an inaccurate picture of where you are, you won't end up where you want to be.

Find Out Where You're Going

Now that you've found out exactly where you are, it's going to be a lot easier to figure out what direction to take to get to where you want to go.

After they had figured out where they were, old-time sailors used a compass to figure out in which direction to go to end up where they needed to be. Their destination was usually a harbor or port somewhere. Your destination is a profitable selling price.

After you've determined your costs of production, settle on a reasonable, achievable profit per acre goal, then translate that goal into a dollar per bushel target price. Here's a worksheet you can use for this step.


Cost per acre	+	Desired profit per acre	=	Total dollars needed per acre


	+		=
Total dollars needed per acre		Average yield per acre		Target Price

Set A Course

After they had determined where they were and used the compass to figure out where they were going, sailors would set a course; they would figure out the best way to get to their destination, then point the ship that way and go.

A successful farmer will do the same thing. After you've determined your target price, you can set a course and lock it in. All you have to do is put in a target order. You will be locked on course for a price that will reach your profit goal. It's never too early to put in your target. The earlier you put it in, the more opportunity you will have to get the price you want. Putting in a target order early is a vital part of this plan. If sailors went halfway across the ocean before they set a course, they might end up in dangerous waters. Farmers who didn't enter target orders early last year learned this the hard way as profitable prices available early faded away as the year went along.

Change Your Perspective

The art of sailing was forever changed when sailors started to use these new navigation tools. The first thing that sailors had to do was change their point of view. In early days, sailors never left sight of land if they could help it. The land provided them with a point of reference; it was their only guide.

In order for the sextant to work, sailors had to take their eyes off of the old way of doing things and look to the stars. Once the sailors learned to trust the new way of navigating, they could get as far away from land as they wanted to without fear of losing course. In return for changing their perspective, they received a better form of navigation that gave them increased safety, confidence, and profitability.

If you have never sold your crops based on profit per acre before, or have never used a target contract to sell your crops before, then you will have to undergo a change of perspective as well.

It may not be easy at first to take your eyes off the old ways of doing things. It was hard for sailors at first to get away from land and trust a new way of doing things. Eventually, though, the new way proved itself in terms of greater safety and greater rewards.

Selling grain in the way we have just described can do the same thing. It will provide greater safety because it is a form of automatic discipline. It's easy to pick a target price in your mind and just say that you'll sell when that price is available; however, it's also easy to get led astray by your emotions when the price reaches your target, and decide to wait for higher prices. Sometimes you may get a higher price doing things this way, but just as often you'll watch as the price goes back down and your opportunity is gone.

Dealing With Danger

Even after new inventions greatly improved their methods of sailing, sailors had some worries. Some were reasonable (storms); others were not (sea monsters). Still, they found a way to overcome their fears and get on with the business at hand.

If you have some concerns (non-production, missing out on higher prices), we can take care of them. A Minimum Price Contract will give you all the advantages of selling ahead with none of the worries. Don't let worries get in the way of your chance for a profitable future. Come in and see us today.

Where Does The Money Go?

In years like last year, when prices that are profitable early on end up in the basement as the year goes along, where does the money go. If prices at harvest are a dollar lower than they were six months earlier, where did that dollar go?

That dollar was available to everyone. For those who were ready, it went into their pocket. For those who weren't, it just disappeared into thin air as the market changed its opinion of what the crop was worth.

Moving On . . .

It's time to put distractions behind and get on with putting together a plan that will help us get crops sold at a profit for next year and years to come. A few years ago, the distraction was high prices; right now, the distraction is low prices. The simple fact is that those with a disciplined and profit-oriented marketing program have been able to maintain some level of stability through all kinds of markets.

The benefits of a consistent, disciplined program aren't just financial. There's a lot to be said for the emotional comfort and stability that comes along with it. Even for those who do use a disciplined marketing plan, the market has enough surprises to stress out even the most stable personality. Why increase it by not having a plan?

Do you know the price you need to sell 1999 crops profitably? We're ready and willing to accept your target orders for next year. Don't let profit slip through your fingers. There's no way of telling for sure what will happen with prices this year, but by having targets in early, you'll at least be sure that you're ready to take advantage of opportunity.

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