Taming the BULLS & BEARS

It’s OK to Keep Marketing Simple
But recognize and take advantage of good old and new
crop selling opportunities when they present themselves.

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

The more I push, the more they pull away.  The more I suggest, the more they resist. The more I give, the less they take. They are the farmers in my marketing groups. They can be stubborn (just like all farmers, and I know from experience, because I’m married to one) and sometimes I cannot understand why they do not use the strategies available to them.

For example, many farmers in my marketing groups have been attending the meetings I facilitate for at least three years, some for as long as eight years. They know the difference between a hedge to arrive and a basis fixed contract.  They know how to buy and sell put and call options. They know crop marketing as well as anyone, but yet many of them stick to the basics.  They never touch put or call options.  They never use a broker.  They simply use contracts available at their local elevator. 

So despite my best efforts to turn them into savvy commodity marketers, they prefer to keep things simple, and sometimes it drives me crazy. I love analyzing price spreads, developing option strategies, and I can’t figure out why everyone else doesn’t agree with me. If you remain in a marketing group for eight years, why wouldn’t you kick it up a notch? 

After expressing my concerns to some of the farmers, they tried explaining their marketing philosophies to me.  The overwhelming sentiment I discovered was their dislike (perhaps mixed with fear) of crop marketing.  As a farmer, you raise a crop that must be sold, so crop marketing is a necessity, kind of like a prison sentence: You do the crime, you pay the time. 

Perhaps you are like me, and enjoy marketing.  Or maybe you feel the same way about crop marketing as a number of the farmers I work with, putting it right up there with getting your teeth pulled. If you can relate to that, then I guess I have to pat you on the back, and tell you how darn proud I am of you. Despite your dislike for crop marketing, you are spending the time to read an article from a crazy woman who loves crop marketing, hoping for a hint or two on what to do with your marketing plan.  The farmers in my marketing group spend a few hours twice a month listening to me rant and rave about the latest trends in the wheat to corn spread.  It must just be killing them!

I guess that my way isn’t necessarily the right way. Yes, I just said it. I am not always right, and my marketing methods don’t have to be your marketing methods. I enjoy spending time on crop marketing, but for some of you, it’s a prison sentence.  You put in your one or two hours at a marketing club meeting every two weeks, and that’s all you care to handle. You leave the meeting, place the orders at the elevator, and get back to watching the crops grow, which is your first love anyway. 

I realize you do not have to do it my way, but I do have a few recommendations. First of all, even if you don’t ever want to use a put or a call option, it’s advisable to still understand how they work. Never say never, and there may be an occasion when you want to use options.  Make sure you understand your local basis and some of the key marketing tools and terminologies such as good til canceled orders, hedge to arrive contracts and carrying charges, just to name a few. 

Secondly, stay current with marketing news and events such as USDA reports and crop conditions. You can subscribe to professional analysts, join a marketing group, or find free commentary on the radio or from your local elevator. 

If your way of crop marketing is working for you, go ahead and stick with it. I won’t badger you to change your ways. You don’t need to be a professional commodity trader to be a profitable farmer. If keeping it simple works for you, so be it.  But at least take the time to know the basics , and recognize and take advantage of good old and new crop selling opportunities when they present themselves.

Now if you’ll excuse me, I have to go check the volatility on my call option spreads, and I love it. 

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.