Long Term Gains, Short Term Pains

The breaking point for me came with EasyMac, a two step package to make macaroni and cheese. Apparently the old fashioned box, where you needed to add milk and butter, was just too complicated and time consuming. Who has time to splash a little milk in a pan? We demand instant gratification! If it requires more than two steps, and takes more than five minutes, it is not worth the effort. It became apparent that we, the consumers of macaroni and cheese, have become very lazy, or much too impatient. And macaroni and cheese is just the tip of the iceberg. While my grandparents walked uphill through blizzards to get to school, my hardship stories to share with my grandchildren may be having to manually roll down a car window, rewind and fast forward music and movie tapes, and even handwriting a letter instead of e-mail. Who has the time and patience for those tasks anymore?Farming does require a little more time and patience. Mother Nature does not allow instant gratification from a wheat crop. The reward for hard work usually takes a few months, often from April to September, but that’s on the production side. We know we must have patience with our crop production, but we get a little greedy when it comes to marketing. We want instant gratification. We want to sell at the highs, and walk away.

But of course it never works that way. We sell a few bushels of wheat today, and then watch the market rally another twenty five cents. We forget about the unpriced wheat still in the bin, or in the fields, and instead focus on the mistake of selling a little wheat too early.

The good news is those short term pains of selling wheat too early will likely lead to long term gains. Instead of demanding instant gratification from your crop sales, look at the bigger picture, and how that sale will make your farm profitable. Pull out your 2010 cash flow, and see what crop prices your farming operation requires. If you just sold wheat above that price, give yourself a pat on the back. You may regret the sale for a day, month, or even a year, but if it cash flows, you really didn’t make a mistake.

This winter I was reviewing a farm management student’s records, and I saw he had classified a $9.30 crop sale as wheat instead of soybeans. I told him not to worry, I’d fix that, and he said it wasn’t a mistake. He did indeed get $9.30 for some of his 2009 wheat, and that was after protein discounts! While the rest of us were still agonizing over making the huge mistake of selling wheat for $10 and then watching it go to $20, this farmer was planning ahead. He knew that selling wheat for $10 was not a huge mistake, even if there was short term pain, and instead he looked at the long term gains. There is a bigger picture out there than just the one day, one week, or one month price movement.

Here is your homework. Get a partner, perhaps a spouse or a farming partner, and stand in each other’s face with fingers pointing, and say the following in a stern voice: “You are not a day trader. You are a farmer, and it is your job to make money from the crops you produce. You are not supposed to pick the highs or the lows, but instead sell your crop at a profitable level. Crop marketing is not about making the right decision that day, but making the right decisions during the year, and even over the next five years.”

So ignore all the clichés recommending that you seize the day, live everyday like it was your last, carpe diem! Ignore that advice, and focus on the long term. Make money producing and selling your crop, not trying to pick the highs. There will be short term pain, but it is all part of the long term gains.