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Interesting marketing article: Why Farmers Lose In Markets?
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Ray (ecks)
Posted 3/27/2007 15:30 (#126460 - in reply to #126353)
Subject: RE: My Thoughts on Marketing



I agree with most of what you said about trying to hit the top. More and more I pay attention to people like John Roach who use moving averages and over bought/sold conditions to guide them. You won't hit the big top, but you hit a lot of smaller one's in the way.

I do disagree about your comment indicating your storage does not work well with your forward contracting. There are a lot of ways it can still be a big benefit.

If you have a lot of storage you have to operate similar to an elevator manager or basis trader. You have to separate the timing of moving the actual product to the timing of setting the final price.

If you've got enough storage to hold everything then you can use the board to lock in a price, put the grain in the bin and wait for a good basis before selling the cash, when you do you buy back the contract and you're out. Even if you want to sell some before harvest, sell it for delivery in a month that normally gives you as good a basis as possible. You still have the price locked in. Nothing says you have to sell it for harvest delivery if you have storage. Use the carry and the basis gain to your advantage. I don't know about your area, but a lot of advisers want you to forward contact for harvest delivery and do so when you have a "favorable basis"...get real, around here there is no such thing as a favorable basis for harvest delivery. EVERY merchandiser knows how wide the basis will get at harvest and that is the only basis they are even interested in quoting.

If you don't have enough storage to hold 100% then you have to think about forward contracting those bushels you can't store. Once you have that taken care of then you need to revert back to managing the rest of your grain like an elevator manager.

I have a spreadsheet set up that lists every field, I put an estimated yield in for each field before harvest. It then figures the landlord shares and totals up how many bushels we expect to have for ourself and our landlords. Real simple to set up. I store some grain for a few landlords so I look at their share and ours and determine how many bushels we won't have enough room to store. Once we get into harvest anything we can't store goes into the elevator/alcohol plant/processor or what ever ASAP. Most of the time the lines are not bad right at the start of harvest. Once we get those bushels in town we start filling bins. We will even put grain in bins if harvest is going good and pull it back out on rainy days when we have more time to haul it to town. As we finish a field and I have a minute to add up tickets I update the estimates on each field, gradually the estimated numbers become more accurate and we can see if we need to get a little more in town. At the end of harvest we're dumping in to bins and everyone else is waiting in line at the elvator, even some of our neighbors with bins who fill them first and then start hauling to town.

On farm storage is a huge asset to have, you don't have to lose it's advantage just to lock in a price on your grain.
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