Taming the Bulls and Bears

Take Your Emotion Out of Grain Selling

By Betsy Jensen, Ag Commodity Instructor, Northland Community and Technical Colege,
bjensen@nctc.mnscu.edu

While speaking to a group of farmers about grain marketing plans, one of my co-workers interrupted me and said “Betsy, you have no emotion about selling this grain, do you?” I was completely offended.  No emotion? Of course I have emotion.  I still cry while watching Old Yeller and get a little teary eyed at weddings. I laugh at the Three Stooges and Monty Python.  I have emotion, and frankly, sometimes I have too much emotion.

But then I began to think about emotion and selling grain. Why should I have emotion about selling grain?  It’s just money.  I don’t get emotional about cashing in a savings bond, or transferring money from checking to savings. Selling grain is just as simple as a money transfer. Why keep the money in the bin when you could pay off an operating loan or earn interest in a bank account?  What logical reason is there to get emotional about selling grain?

There is no logical reason, but yet many farmers have a very difficult time selling grain. In the marketing groups we joke about naming kernels, and it’s often true. Farmers are often very reluctant to sell their crop. Maybe they feel a sense of security with their bins full of grain, checking account empty and operating loan accumulating interest. 

It can be difficult to sell grain if you think prices are going higher.  But you need to set realistic price targets and also ask yourself: What will happen if you’re wrong and prices go lower?  Can you afford to be wrong, and is the price upside potential enough to justify the risk? There are some very intelligent farmers in my marketing groups, and yet we can never agree on whether prices are going higher or lower, or how much. Trying to determine commodity price direction isn’t a function of intelligence, as much as it is luck. 

Even if you decide to hold grain for higher prices, are you sure your price targets are realistic? Minneapolis wheat futures typically trade between $3 and $4.  We like to talk about $4 wheat, but we don’t see that number very often, and prices don’t often dip below $3.  Be aware of your local price ranges, and try to make sales in the upper half of the range.  I know one farmer who has sold 2002 wheat for $3.69 cash, so there have been opportunities to sell grain in the upper half of the historic price range.

 Try to picture your grain bins as a giant savings account, but instead of looking at those bins as accumulating interest, view them as accounts that might actually be charging you interest. There are two realities you need to remember:  1) You produce that crop for the sole purpose of selling it, and 2) You really don’t know which direction prices will move. Once you can accept those realities, it makes selling grain much easier.  Emotion doesn’t have to be a part of it.