Betsy’s Bulls and Bears

Marketing When Markets

Are As Dull As a Butter Knife

 Ho-hum.

I’m beginning to get bored watching these markets, and I still have several months to go until summer weather scares begin. 

We’re stuck in a holiday market lull, with no major USDA reports on the horizon, no weekly crop conditions and no make-or-break weather forecasts (unless a giant meteor hits Brazil).  Just a few little export sales announcements here and there, and the mandatory once a month USDA report that no one seems to care much about anymore.

Like an NFL player after the Super Bowl, there’s a giant void in my life. After watching soybeans rally from $5 to $10 and then drop back to $5, the current market moves seem trivial.

It’s harder than ever to market my grain in conditions like these. Last spring and summer I was on my toes watching the markets move double digits on a daily basis. I was selling here and there, and calling every area elevator to find out their local price.  Now, instead of having a finely sharpened marketing plan that is ready to take advantage of any rally, my marketing plan seems as dull as a butter knife.  There haven’t been any significant changes in the value of my unpriced inventory, and it’s difficult to get very enthusiastic about doing any grain marketing when the markets only move one or two cents per day.

It’s easy to crawl under the covers and ignore grain marketing in times like this, or disappear for months on end in the fields, into deer hunting and ice fishing, and emerge only when the banker calls for a check.  Still, just when you think your price target will never be hit any time soon, something can come along (like Asian rust or another mad cow) that can make a difference. Just when you think wheat can’t go any lower, it drops another 20 cents. Or maybe sudden winter-kill moves it 20 cents the other way, who knows.  It’s important to always stay on your toes, even if it’s not always jaw-dropping exciting to watch the markets.

Now is the best time of year to learn new things about marketing.  If you’re unfamiliar with your local basis or with options, make the effort to learn.  You have more time on your hands now, and it’s important to be prepared once you get back into the fields. If you haven’t already, write a marketing plan for 2005. Get involved with a marketing group. Attend meetings and seminars on grain marketing that are virtually certain to be held in your area.  Consider opening a trading account. These type of activities will pay off once spring begins, when the weather markets start moving and marketing becomes fun again.  

Does the end of the year or the beginning of a year have any significance on commodity prices? Usually, not much. Markets tend to move sideways with little significant movement either way through the holidays.  We may see some funds taking profits or losses before the end of the year, but January 1 in itself doesn’t mean much to many farmers as far as commodity prices are concerned.

Still, as I mentioned before, that doesn’t mean we should be caught dozing.  One thing that can happen before the end of the year is increased volatility.  Many people take vacations during Christmas and New Year’s, and that means less trades. If a big fund decided to sell its soybean position, there might not be enough buyers available.  Anytime trade volume is low, we are at risk of increased price volatility. Remember that price volatility means up or down.

Also, after Jan 1 it’s common to see heavy cash grain delivery.  That would probably not have much effect on the futures market, but it could weaken the local basis.

Marketing may not be fun, glamorous or exciting for the next few months, but it’s still something that has to be done.  The next major market move may be just around the corner, ready to surprise anyone who is sitting in an ice house completely ignoring the markets. Have a plan ready, and consider placing an order or two at the elevator to sell at a specific price, and hope that it gets filled. You can still go ice fishing this winter, but make sure it’s not at the expense of your grain marketing skills.

Jensen farms with her 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. If you have a question or topic related to marketing that you’d like to see addressed in this feature, call 1-800-242-6118, or email Jensen: betsy.jensen@northlandcollege.edu.