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FARMERS' CORNER | |||
| "To Help The Producer Sell Better" | October 1996 1996 Number 9 |
|
FARMERS' CORNER | |||
| "To Help The Producer Sell Better" | October 1996 1996 Number 9 |
"You have to know what you want to get."
----Gertrude Stein
In Good Company
Thomas Edison once performed 5,000 unsuccessful experiments while working on one of his inventions. When asked why he persisted after failing 5,000 times, he replied, "I have just successfully discovered 5,000 ways that will not work. That puts me 5,000 ways closer to the one that will." Thomas Edison had his eyes on the big picture.
When Sam Walton opened his first store, most people thought he was doomed to failure. At that time, the trend in stores was to have a few items and make a large profit on each one. Mr. Walton thought that he could do better by having a large selection of items, and selling more items at a smaller profit per item. Obviously, his idea was a success, and Wal-Mart stores can now be found all over the country. Sam Walton had his eyes on the big picture.
The history of the United States and the entire world is filled with stories of successful people who kept their eyes on the big picture and would not be distracted from their goals.
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Win the War, Not the Battle
The ultimate goal of an army at war is to be victorious. True victory is not measured in battles won or casualties inflicted on the enemy, it is measured in terms of the entire war. When the enemy surrenders, the war is over. Even if one army wins many battles, if they lose the war, it doesn't matter.
What if the commander of an army focuses all his attention on conquering one city? He may take the city, be forced to retreat, and then take it again. This whole process could happen several times. The point is, this commander has allowed himself to be distracted from the big picture. The war is much larger than just one city. By taking his eyes off of the big picture and allowing himself to be caught up in the details of the moment, the commander has seriously jeopardized his chances for victory.
Dwight Eisenhower understood the importance of looking at the big picture. During World War II, he knew that the key to victory was not in taking any one city or winning any one battle. The war would be over when he had defeated the German military. He focused on this goal and would not allow himself to be distracted and bogged down in details.
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What Does All This Have To Do With Me?
Farmers who are consumed with monitoring prices and trying to get every last penny out of the market are like the commander who focused all his efforts on that one city. They allow themselves to get so caught up in trying to predict the price of one crop that they forget about their long-term goals. This can turn into a self-destructive habit that repeats itself every year.
Granted, prices this year have been more distracting than usual; they are higher than they have been in several years, and many are saying that they'll go even higher. In an environment like this, it can be very easy to get stuck on this year and forget about the long-term, but here's what you need to remind yourself: Will this one crop ultimately determine whether or not you reach your goals in life? Not at all. You can only achieve your goals by a commitment to selling profitably with the least amount of risk possible every year that you farm.
What are your goals? There are as many different goals as there are people, but chances are that if you made a list, at least some of these would be included:
* Pay off the farm
* Preserve my independence
* Provide for my family
* Help my children get an education
* Enjoy a comfortable retirementThese are things that all of us want. Is any one of these worth giving up for the chance to "sell at the high", when there is a much less risky way to achieve them?
Most farmers are farmers for life. It isn't just a hobby or something you do on the weekends; it's your livelihood. Farming is the means for achieving all of your goals. Selling at a profit year after year after year is the quickest way to reach your goals. Because this is true, it is vital that you look at the big picture.
If you already sold your crops this year and made a reasonable profit doing it, congratulations! In the short term view, it can be disappointing to sell and then watch the market go up, but in the long term, that is one more step on your way to achieving your goals. If you keep it up, you will get there!
Who Is "They"?????
"They say that corn will hit five dollars." "They say that prices are going to a new level." "They say that now isn't a good time to sell."
Today more than ever, we are surrounded by "They". New advances in technology bring "They" closer to us all the time. "They" always have opinions about the unknown, and makes all kinds of predictions about the future.
Who is "They"? Does "They" pay your mortgage? Does "They" send your children to college? Does "They" fund your family vacations? Does "They" save for your retirement?
Technology is not a bad thing, but the wealth of information that is at your fingertips can be harmful to your success if it is allowed to cloud your focus. Remember, "They" may have an opinion on what you should do, but only you have the final say. If you are committed to selling at a reasonable profit year after year with the least amount of risk possible, you will recognize true success.
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Storing Grain at Harvest:
Is It The Right Alternative?
Some farmers may be considering putting grain in storage at harvest in hopes that they will get a higher price later. Looking at the big picture, is this the best alternative?
Grain in storage has unlimited price potential; the only problem - that price potential goes both ways. In other words, the price can go just as far down as it can go up. There is absolutely nothing that can protect you from lower prices, and storage costs and interest can eat up whatever extra income you may get from storage. Remember too that you will pay these costs whether the price goes up or not.
Given current price levels, the best thing you can do is just sell at harvest if you haven't sold already. New crop prices are well within the top 1/3, and they should give you a good profit margin. Remember, looking at the big picture tells us that the surest road to success is selling at a reasonable profit every year instead of trying to squeeze every last penny out of the market each year.
However, if you have already decided that you are going to store your grain at harvest no matter what, you may want to consider Minimum Price Contracts instead. For a very competitive cost, Minimum Price Contracts will lock in the profitable price available right now and allow you to receive more if the price goes up!
**Note: If you have your own on-farm storage, you can take advantage of premiums for after-harvest shipment. Come in and talk to us about locking in a profitable price for Jan/Feb/Mch delivery now. You can also tie this in with a Minimum Price Contract to give yourself the ability to participate in higher prices if they occur.
Storing vs. Minimum Price vs. Selling
| Storage from October 15 to April 15: |
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| Cost: | ||||
| Storage Fee: .025 x 6 mo. | .150 | Pros: | Possibility of higher prices. | |
| Interest: 9% x 6 mo. | .135 | Cons: | No protection against lower prices. Cost. |
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| Total Cost | .285/bu | |||
| Sell at Harvest (October 15) and Minimum Price until April 15: |
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| Cost: | ||||
| Minimum Price Fee | .180* | Pros: | Possibility of higher prices. Lock in profitable price. |
|
| Total Cost | .180 | Cons: | Cost. | |
| *M/P costs may vary--contact us for current costs |
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| Sell at Harvest: | ||||
| Cost: | ||||
| None | .00 | Pros: | Lock in profitable price. No Cost. |
|
| Cons: | No possibility of higher prices. | |||
| Total Cost | .00 |
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Running Up The Score
When a football team is up by seven points with one minute left in the game, a good coach won't tell his team to make the long pass and try to win by fourteen. He'll tell them to hold on to the ball for the next sixty seconds. Right now, they know they have the win. If they try to get that little extra, they could lose the ball and the game. Whether they win by seven points or fourteen points isn't the issue. Getting the win is what's important. If the coach follows this philosophy game after game, he will have a successful team.
When a farmer has a profitable price available to him at harvest, he's in the same position as that football coach. He's already got the win; does it make sense to try and get a few more cents? He might get them, or he might watch as his profitable price ("the win") slips away. Think about it. . .
