Production vs Marketing

[malleefarmer]

depending on your starting yield a 10 to 15% increase in price usually beats similar increased yields.

also if getting the extra yields costs extra dollars can be self defeating

[farmaholic]

The plane, the plane!!

[farmaholic]

Bottom line: if you don't have it you can't sell it!!

[farmaholic]

>

[hobbyfrmr]

Cotton, that had me LOL first time ever!

Freewheat, I agree with you. I have debt and I meet with my bankers annually. I usually forward price at least 25% of one crop I plan to seed. I usually need that money for property taxes, harvest fuel bill, and salaries. It gives me downside protection at harvest time, when I need the storage space and money. In the last 20 years of farming, I am conditioned to low prices at harvest and small increases through winter until South American harvest then back to low prices. That was the pattern for waaaaay to long.

Every farm is different. Around here some of the older guys talk pretty good, new machinery,claim best of yeilds,never collect from Govt programs,always get the highest prices, so I guess they dont have debt. They are the real smart ones always offering advice/misinformation in public like,town supper,trying to make themselves look smart. When conversation turns to cost of production per crop you can see them trying to bullshit their way through it. Its sad.
They have too much money and I am jealous!

[rockpile]

How could you possibly ignore marketing and focus
only on production? Are you saying "build it and they
will come?" Shouldn't you compare what is in demand
and what isn't and plan from there? Production is a
short term snapshot - marketing is a long term
strategy. And you should be looking at least 24
months out paying attention to what is going on the
world. I'm starting to think a lot of you can't see past
your driveways.

[farmaholic]

I actually have quite a long driveway.

My point is if you don't grow it you can't sell it(physicals). As mentioned earlier, there is more to profit than just price. Quantity, quality, cost of production each contribute as well. We all know when all four are managed as best we can there is a good chance we will be around for another production cycle. Then of course there is the great equalizer, Mother Nature!!

Good luck to everyone this coming season!!

[ColevilleH2S]

IMO 51% of marketing is deciding what crop to, or not to, put in the ground each spring.

[errolanderson]

If you do not want to commit to signing
fall tonnage on a deferred delivery
contract, these are put options of
interest.

November $550 puts might trade for
$20/MT today. Strike $550 - Premium $20
= $530/MT - fall delivered basis. It
appears Nov basis levels are running $10
under to $10 over.

Remember, with this risk management
tool, you are not obligated or produce
or deliver the canola. It's pure price
insurance without risk of payout
penalties or grade concerns.

Best guess scenario is that they expire
worthless. That means that Nov canola
expired at or above $550/MT

But if Nov drops to $480 into the fall,
you will be $70/MT in the money and can
cash them out at a huge profit.

Errol

[freewheat]

Great point Coleville. And though we may
study the projections, and hope for the
best, it is still quite non-scientific,
fairly wild a guess. Within rotational
needs of course.

[charliep]

On Errol comment, I will through Spring Price
Endorsement into the mix if you live in Alberta. The
insurance price for crop insurance is $500/tonne with
the market needing to dip below $450/tonne to
trigger a payment. You can compare the cost of an
SPE to the put option that Errol talks about. An
advantage is you can also use an SPE for crops
without futures markets or ones that are not as well
defined in the new world (eg. wheat in the coming
year). The base grades on AFSC/SPE insurance
grades likely fit the profile of what farmers in Alberta
can grow.

Errol - Just curious if any of your clients are looking
at buying put options in MGEX or KCBT? Corn as a
weather hedge?

Good discussion.

[charliep]

The $500 is canola by the way.