 May 1999 -- 1999 Number 5 |
INDEX
- May 99 |
May 1999 -- 1999 Number 5 |
INDEX
- May 99 |
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Every day since harvest, any bushels that haven't been sold yet are taking money out of producer's pockets. They will continue to do so every day until they are sold. Why do so many producers allow this to happen? For the most part, they are hoping that prices will increase enough to pay this money back and more besides. Unfortunately, all too often it doesn't turn out this way.
After the decision to delay pricing has been made, a dangerous cycle starts. If the price does increase, the temptation to wait for more makes it difficult to make a decision to sell. If the price goes down, the automatic response is to wait for prices to at least get back up to their original levels. This can happen over and over again depending on the volatility of the market, and all the while the marketing meter is ticking away, costing more and more every day.
On the surface, it may seem sensible and even productive to delay pricing after harvest, especially if prices are low at harvest, but the situation that results can be just the opposite of what the producer was hoping for.
Why Put Off Selling?
What The Producer Wants From Waiting A reasonable return on his investment.
A chance for better prices.
A profitable marketing season.
What The Producer Gets By Waiting
Additional costs that will only stop when the crop is sold.
Continually higher price needs (to make up for storage and interest paid).
- Unlimited risk.
Prescription For Poor Marketing Eyesight: Look Ahead
Troubled times make it hard to stay focused, but the longer you dwell on the distractions of today, the harder it is to get your plan back on course. Spending too much time looking at immediate circumstances blinds you to the big picture. How can you get your marketing focus back where it belongs? Try following this "prescription".
1. Get rid of old crop distractions.
Are you still holding on to last season's grain? The situation keeps getting worse. Costs are mounting every day, and prices aren't getting any better. Why not remove this distraction? Make a decision to sell old crop, and use Minimum Price to stay in the market. You'll put a cap on your costs, still be in the market, and it won't affect you if prices go lower. Plus, those bushels won't be hanging over your head any more.
2. Avoid this situation in the future
Minimum Price Works Every Time
Is it accurate to say that because a Minimum Price Contract didn't result in a better price that it didn't work? Not at all. A chance for more money isn't the only benefit Minimum Price has to offer.
If you use Minimum Price and don't get any additional money, you still get something from the contract. . .
A price floor so you don't have to worry about the price going lower.
You get a check when the contract is signed, so you can pay off bills or store a commodity that will grow in value: money.
The security of knowing that you had a price locked in and weren't just at the mercy of the market.
The relief that comes from taking positive marketing action instead of just waiting around to see what happens.
As part of a disciplined, focused, marketing program, Minimum Price works every time you use it, whether the market goes up or not.
To Our Customers Who Are Still Storing Grain
We want to help you. Our business cannot succeed unless yours does. We receive income when you store grain at our elevator, but we do not believe that storage is in your best interest. Please come in and talk with us about how we can stop your price risk on old crop and grain and get a plan together for new crop. It's time to put last season behind us and start looking to the future.
Will You Be Ready To Answer If Opportunity Knocks?
Why You Should Have
New Crop Target Contracts Entered
- There is still time for prices to move before harvest.
- Target Contracts are watching the market when you can't be.
- Target Contracts don't have that temptation to "wait for just a few more cents" when the marketstarts getting close to your goal.
- Getting grain sold ahead of harvest will eliminate your exposure to price risk and added costs.
Things To Consider When You
Enter Target Contracts
- Is the target price reasonable? Targets far above normal market levels are unlikely to do any good and may cause you to miss more realistic opportunities.
- If you are anticipating above average yields, you may be able to achieve a good profit per acre at a lower target price.
- Are you offering enough of your crop to make any real difference if your target is hit?
- Scaling targets can increase your opportunity. For example, if your profit per acre goal is $50, you might enter targets to sell 20% of your production at $30, 20% at $40, 20% at $50, and so on. This will give you a better chance of getting some bushels sold at a price you can live with.
If Your Targets Aren't Filled. . .
- Make up your mind to have your bushels sold by harvest. If you need to stay in the market, Minimum Price will let you do it for the same cost or less with much less risk.
Is There A Silver Lining?
It's hard to find anything really positive to say about low prices, but there may be some good to come of them after all.
Low prices encourage the development of new users of our products -- and when prices return to better levels, these users will still need what we produce.
Low prices have cast a dark cloud over the heads of producers everywhere. Eventually, that cloud will go away, and when it does, it may leave a silver lining behind.
