Taming The Bulls & Bears

A Gold Star

by Betsy Jensen, Ag Commodity Instructor, Northland Community & Technical College, betsy.jensen@northlandcollege.edu

Ispent a few hours in the kindergarten class to help my daughter celebrate her birthday. It didn’t take long before I was uncovering all sorts of repressed memories; line leaders, recess, quiet time, milk break, show and tell, the obvious insanity of anyone who decides to become a kindergarten teacher. Robert Fulghum wrote the book “All I Really Need to Know I Learned in Kindergarten” and if he’s right then there has to be something in that little kindergarten classroom that is applicable to grain marketing. The first idea I found was gold stars. Good behavior is rewarded with a gold star on your paper, or maybe a chart that is posted on the teacher’s desk. Maybe I should create a “Gold Star Marketing Plan.” For the past few years I have really struggled with a grain marketing plan. Life was easy when wheat traded with fifty cent range, but putting together a plan for $5 price swings is proving to be a challenge. A 2008 spring wheat marketing plan could have a $15 price target if written last spring, and today $15 wheat seems like a stretch.

Instead of focusing on price targets, maybe we need to reward the market when it behaves well: Give it a gold star so to speak. If wheat rallies 10 percent, you will sell 5,000 bushels. You can change the amount of bushels you wish to sell, but keep the percentage the same . If wheat bottoms at $5.00, make a sale at $5.50, and then another at $6.05, and another at $6.65. Keep increasing your sales prices as the price goes up. You can always back off on the number of bushels sold, but continue to make sales.

I have a traditional marketing plan, and my next sales target is $10. I hope I still hit that price target, but realistically, I will probably have to sell some wheat for less than $10. I could lower the target to $9, and then $8, and then $7, or I could just admit that I don’t know where wheat is headed, but if it rallied 10%, it deserves a sale. Nice job wheat, here’s your gold star. You’ll earn another one if you can rally another 10%.

You cannot walk into a kindergarten room without reading. Everything is labeled; desk, window, door, chair. Objects are tied with words, and pictures accompany the vocabulary words, so I am going to try and use pictures for grain marketing. I often ignore charts, and then whenever I pull one up I am shocked by the size of the rally or drop, or the number of gaps, or maybe I had forgotten how high prices were at one point. I do not consider myself to be a technical trader, but sometimes you need to see a picture of price movements to realize how great of a rally we have experienced. Unfortunately sometimes the charts also show how far and fast things have dropped, and maybe that $10 wheat price target needs to be revisited. A picture is worth a thousand words, so try and use more pictures in your grain marketing.

Finally, kindergartners are expected to clean up their own messes, and play nice. I am tempted to blame my marketing mistakes on anyone or everyone else. It was the hedge funds’ fault that wheat crashed after harvest (although we should probably thank them for the rally to begin). It is my husband’s fault we have unpriced 2008 wheat because he produced too much (that is my favorite excuse). My elevator manager should have warned me how bad protein discounts would become. While the blame game would be fun, it would not be fair. Unfortunately I am the only one to blame. It only takes one day of high prices to make sales, and we had an opportunity to sell spring wheat at harvest with protein discounts that were much less than what we have today. If your marketing advisor was bullish this summer, join the club. So was nearly everyone. You are in charge of your own marketing, so clean up your own mess, and stop pointing fingers. You can always fire the advisor, but do not ever assign blame for something for which you had total control.

I’m still trying to figure out how to tie to grain marketing some of Fulghum’s other kindergarten ideas such as take a nap every afternoon and warm cookies and milk are good for you. I have not yet found the connection, but don’t be surprised if you get my voicemail after the markets close. I think we all need an afternoon nap after getting tossed around in these grain markets.