Marketing advisors

[blackpowder]

Hail in area tonight, nothing significant but …… a reality check why one can’t forward sell any significant amount till it’s in the bin
it has cost guys in this area , and to an extent us huge this past 3 out of 4 years but we are generally “too conservative” on pre selling, a fortune that is not there.
grain companies have near zero liability, it’s all farmer risk
I will take a small loss to make sure my family is fed before theirs
just my opinion

99% of the time there is only one winner when short a contract, and it’s never the farmer who put the sweat equity and a fortune into actually growing it . Most contracts are just 5 minute paper transaction that takes zero effort or money on the buyers part

still bugs me when there is commentary from those in industry that state “well you could have sold for way more money”
sorry you have zero clue on reality of farming

I wholeheartedly agree with your last paragraph.

But I find options strategies cheaper and broader than extra hail insurance and are sometimes exit-able. I'd rather not ever make money on them. And they only work on wheat and canola.
Production insurance on short contracts.
Not perfect and not for everyone I understand. But they can be a real tool. We are small grain companies and can use some of the same tools as the big ones.
When we write a check to the big boys, we're doing the same thing only naked. It's not about getting the highest price of the year. It's about covering a naked short. (Sale)

[redleaf]

Short crop in 21 had many writing checks to cover shortages. One neighbour who has consistently forward contracted a large portion of his annual production, was moaning a bit and I said well the “experts” would have advised you to cover your contract risk with options. So just think back over the years that you didn’t buy options to expire worthless and imagine that you are writing the cheque for just a portion of that now.

[blackpowder]

Very fair. Like any insurance. Eventually you're upside down.
If you can stand the hits.
I use spreads. Far cheaper, but you have to watch them. And only on a small portion. Never whole crop.

[wheatking16]

I am interested in knowing people's experience with options.

Have they made you money or cost you money?

[blackpowder]

I've dabbled for decades without any regimen. Last few years, I'm older, and I've got a great broker for a hedging producer. Haven't fed it money in quite a while.
But now I'm fairly strict about purpose.
I never re-own. It's only loss of production ins for a sale. Or covering unpriced inventory. On inventory it's never all, and sometimes none.
For those purposes I'd be happy to lose. Again, usually spreads.

[heidi.dutton@me.com]

Advice from the other side: As a processor and market participant, I still use Larry as a marketing advisor.

[furrowtickler]

Absolutely one of the best

AOG on all contracts and I would market a lot more ahead of time .
writing cheques to grain companies when the grain is not there due to Mother Nature is crippling to farms .

[AlbertaFarmer5]

Absolutely one of the best

AOG on all contracts and I would market a lot more ahead of time .

Can anyone explain to me how an originator can offer an AOG?

Either they have already presold the product at the same time as the farmer presells the grain to them, and they will then be on the hook to supply said product when the farmer can't due to an act of god.

Or else they are speculating and have not presold the end product while simultaneously guaranteeing the farmer a certain price far into the future. Which seems to be even more risky in a low margin industry.

Or is there insurance that the purchaser/processor can buy to cover this?

Or is the AOG written into the contracts all the way up the food chain if triggered at the farmer level?

[LEP]

Can anyone explain to me how an originator can offer an AOG?

Either they have already presold the product at the same time as the farmer presells the grain to them, and they will then be on the hook to supply said product when the farmer can't due to an act of god.

Or else they are speculating and have not presold the end product while simultaneously guaranteeing the farmer a certain price far into the future. Which seems to be even more risky in a low margin industry.

Or is there insurance that the purchaser/processor can buy to cover this?

Or is the AOG written into the contracts all the way up the food chain if triggered at the farmer level?

It's a risk to the processor. Usually, but not always, at a slightly lower price to help offset the risk.

I understand why more companies don't offer it.

However, I don't know why they don't offer it on a hedgable commodity. I realize there would be a cost. But if there were a greater use of options because of uptake, the price on options should be reduced.

[AlbertaFarmer5]

It's a risk to the processor. Usually, but not always, at a slightly lower price to help offset the risk.

Thank you
Nothing is free.

The producer will end up paying the cost one way or the other. If we want someone else to take on the risk.