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Taming the Bulls & Bears Are You Prepared to Pull the Trigger on Price Spikes in ‘06? By Betsy Jensen As I work with farmers on cash flow for 2006, ma Too soon for the white flag, however – I’m not going down without a fight. I refuse to accept the fact that the farm is destined to lose money in 2006 , and that all I can do is to hope for better numbers in 2007. I do believe that there will be opportunities to make money on the 2006 crop, and I’m watching to take advantage of those opportunities. The Farm Service Agency assigns prices for farmers to use on their cash flows, and in my district they have decided on $5.10 for soybeans and $3 .50 for wheat. The cash flow budget for ’06 would get a whole lot prettier if we could contract soybeans for over $6 and wheat for $4. But if a weather scare came along suddenly that threatened South American beans or Kansas winter wheat, would we take advantage of what we were wishing for? Some farmers would, but some wouldn’t, since we have a tendency to look a gift horse in the mouth. Soybean prices rally over $7, and we suddenly want $8. Wheat goes over $4, and we want $4.50. Sound familiar? This winter I’m spending a lot of time with farmers I work with in marketing classes and marketing groups, researching call and put option strategies. It’s times like these where participating in a marketing group is very worthwhile. It’s like a support group, of sorts, to bounce around ideas about ways to cash flow, manage inputs, and sell grain in 2006. Those who participate would agree it’s much better than going it alone. If you don’t belong to a marketing group, look at joining one, or work with your county extension educator, farm business management educator, ag lender, or other farmers to start one. So how can we find a way to lock in profits, if an opportunity presents itself? I think it’s too risky to sell 30 bu beans and 50 bu wheat at the elevator, so maybe I’ll purchase a put option if prices spike. I have a lot of different strategies floating in my head, and put down on paper, and I do feel I’m prepared to take advantage of a profitable opportunity. As far as production, well that’s my husband’s problem. I have faith that he and Mother Nature will work together to produce a good crop. It’s my job to make sure the crop is sold at a decent price. I’m still optimistic, and I think you should be too. Don’t just sit there wishing for prices to go up. Do your homework. Know what your breakeven is for ’06. Research what crops hold the best opportunities this year. Keep on top of your local basis. And when prices spike in 2006, you’ll be in a better position to recognize opportunities and make selling decisions. Jensen puts her marketing strategies to work farming with husband Brian near Stephen, Minn. Her market education activities including this column are supported in part by the Minnesota wheat checkoff, directed by the Minnesota Wheat Research and Promotion Council. Jensen Receives National Recognition The Association for Career and Technical Education is the national professional association for the field of career and technical education. Now in it’s 79th year, ACTE’s membership numbers more than 30,000 teachers, counselors and administrators at the middle school, high school and postsecondary levels. The ACTE Oustanding New Career and Technical Teacher award is given in recognition of a career and technical teacher who has made significant contributions toward innovative and unique career and technical education programs and shown a professional commitment early in an educational career. Jensen manages crop marketing and record keeping at the family-operated Jensen Farms, and is a farm business management instructor at the Northland Community and Technical College East Grand Forks Campus. |
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ny seem resigned to a
tough year, hunkering down for a storm of red ink.