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Esteemed Advisor

Re: Hi Guys

Hi Jen...hope you are feeling better.

To correct a few misconceptions:

1) We don't have a marketing service, advisory service, or anything that gives any advice for your farm in any way. Our site merely allows members to get to know each other and share information. Lots of information, economics of solar panel installation, wheat-dc corn issues and economics, soil degradation from tillage (Dr. Hatfield summarized the recent data and its implications), maximum economic yield goals and how they drive our fertility and seeding formulas, and yes history about the markets, and tools availabe to manage our investment risk in inventory, inputs, etc.  Since it costs a fair amount to pay for the site, meetings, meals (we have nice meals), etc., there is a very small fee for access. No reason for us to subsidize folks who are quite succesful financially. Smiley Very Happy

 

2) Why would you think we sold puts? There is almost never a valid reason a grain farmer should sell grain puts. Very seldom should a farmer buy grain calls either. Yes, we sell options sometimes but hardly ever a put, maybe if we are hedged and have a price we want to exit the hedge at, we might take put premium but it is pretty unusual. My favorite strategy for extra bushels in a "full carry market" is to have the grain in the bin unpriced and sell a deferred call, so you are selling the carry if exercised and taking the premium, blows the doors off of a bin/lock/vacation program statistically. Of course, this year unpricing the grain at harvest is pretty risky. It might be too early as the winter low could easily be lower than the harvest low, and the spring low even lower. That is just the history and math of the current time, obviously no way to know for sure, we will just have to let TIME pass and respond accordingly.

 

It is a curiousity of human emotion... you shared that farmers came into the elevator at harvest and just sold the grain. This selling is exactly what drives the price down at harvest, not some massive government/speculator plot to screw the farmer. The farmer does it to himself. The users/specs know this in May and thus the farmer finds it easy to blame them most often, but still not sell. Since this is seasonal, and pretty reliable statistically, you can build a plan as a farmer to take advantage of it, or said more bluntly you can build a plan to take advantage of your neighbors behavior. This is my simple point about the advantage of having a plan and focusing on improving it over time with experience. No plan, no baseline, no continual improvement. Simple and not being arrogant at all. Our minds don't remember things perfectly(especially mine), there is self-deception and rationalization, that always skews our memory of the past, and thus for our farm we find it of value to actually write things down and review performance and get better at things with experience. There is also alot of value in benchmarking with peers and sharing information about tools available, what doesn't work, what does, etc.  Not for everyone obviously, but I think exchanging information with our peers is good for our farm business.

 

Hope this helps shift your negative perception of our farm just a bit towards the middle of the road. Smiley Tongue

 

Oh yes, and one of our normal powerpoints each year is the review of a plan that failed and why it failed and how to avoid failure in the future.  You would like that I think. Two of my favorites are the storing of grain unpriced in 1994 (because we knew corn was going to at least $4 in 1996) and the drought of 1989 that we expected which obviously came in 1988. Lessons learned in those two failures greatly informed the plans we implement today. The first point at this years meeting was: 2015 is very unpredictable as compared to the last 10 years in the grain business. The last 10, in general because of the energy injected into the market by external events, have been pretty predictable, 2015 should be the first year with very little old energy left to be digested, and thus becomes more unpredictable and so we have to plan with less confidence. Review our homework regularly and be willing to let the market lead us into good decisions.

 

All that said, any big volcanoe going off coupled with a weak sun and heat units will become pretty valuable, so maybe a lack of energy will drive instead of an abundance.

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Veteran Advisor

Re: Hi Guys

Thanks for the reply Timer.  Maybe I was a bit harsh on you this weekend.  

 

I, along with probably the rest of the American public, get tired of being swamped with ads in a continuous barrage from everywhere we turn.  There are so many scams out there, so many different entities vying for a piece of what ever pie they can get a slice of.  

 

From several different sources, it sounds as if you have something that could be helpful to many of us.  Maybe I need to make room to attend your next conference.  I've said that before though.  It didn't work this time because of my being here in OKC.  By Spring of next year, I hope to be done here.  It is yet to be determined whether or not I return later next summer.  Retirement is looking better and better all the time.

 

I liked your reply - thank you.  And you are right - humans are very poor with history.  An event happens, it's over, and it's on to the next thing.  It was like that in the FAA.  We would try something, it didn't work, so we canned it.  A few years later, we'd get a new supervisor, and they'd have this great idea - essentially the same one we trash-canned a few years before.  And guess what - it didn't work, again.  Gee, we didn't see that coming.  Because of that, I have tried over the years to retain more of that history mentally, but it's difficult.  In the case of a farmer trying to improve on marketing skills, you are exactly correct.....it needs to be written down.

 

I think you, and maybe others, are confusing my bin, lock, and go on vacation as a marketing plan.  It can be, but it has more to do with the bushels that didn't get sold prior to havest as part of a farmers marketing plan.  Harvest time, like you mentioned, is usually not the time to sell the crop.  Usually.  I have seen several years though where the highest price paid for the crops was at harvest.  Did I write it down - no.  Should have I - yes.  And that's the point.  I remember that there was a time when it happened, several times, but I don't remember any of the specifics of the event.  What was going on with world events?  Why was the commodity higher in the fall?  See - that's what I have lost, even trying to remember, I can't.  I think I can - but I can't.  

 

I see it every day when I'm teaching students.  One of the main things we try to teach the student, is that you need to complete the task at hand, no matter how many phones are ringing or how many are vying for your attention, you complete what you are doing - every part of it, and then move on.  it seems simple enough.  But when you are being pulled in many different directions all at one time, it makes it hard for the student to not grab the new shining bulb, instead of finishing what they were doing.  As instructors, we know that if a student does not complete a task, and does not make some kind of a note to themselves to go back and finish it (maybe they got pulled away because of an emergency, etc), 99% of the time, they never go back to finish the task.

 

We humans think we are so good at multitasking.  Think again.  If anything teaching down here as taught me, it's that we humans suck at multitasking.  Sometimes, we can get away with doing more than two things at once, and usually, both suffer.  It's why we can't text and drive, or basically do anything and drive, because the driving is then compromised.  The students that try to multi-task here at the academy, fail.  It simply can't be done.

 

Anyway, all of that was to say, we as humans have a lot of misconceptions of what our brains are capable of.  We all need to write important stuff down more than we do.  And when it comes to the financial well-being of a farm, it has to be.  

 

It was a rough weekend for me.  I'm sure glad I didn't have to go out, milk the cows and do chores.  Guess I'm getting weak......

 

Jen

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Esteemed Advisor

Re: Hi Guys

Excellent thougths..thanks. It is a new week...let's both make it a good one!

 

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Esteemed Advisor

Re: Hi Guys

btw...what is happening in wheat is what should concern folks about corn. Storing wheat unpriced after harvest is just about to turn into a nightmare. Lows gotta hold...period. TIME is out Smiley Surprised

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Senior Contributor

Re: Hi Guys

Man, reading these conversations wears me out. I like the way I market better. An example from today's concluded feed barley negotiation:
1. Customer: James, I need 600 ton of organic feed barley from 2015 crop.
2. Me: no problem. I know a farmer interested in planting 260 acres fall barley.
3. Farmer: I'll have 800 ton.
4.customer: I'll take 600, just don't need 800 ton.
5. Farmer: OK, James, what's it worth next year?
6. Me: what do you need?
7. Farmer: $440/ton cleaned
8. Me to customer: Ok you have 600 ton. Is $440/ton ok?
9. Customer: Who is raising it? Walt?
10. Me to customer: yep, he does a good job. You got a little of his barley last year to fill in your feed wheat needs when I ran out.
11. Customer: Same variety?
12. Me to customer: No, better. Doesn't lodge, better test weight.
13. Customer: I can go $420
14. Me to farmer: Walt can you go $420
15. Farmer: No, I'd rather not. Cleaning costs money.
16. Me to grower: Walt I don't think you need to clean it. It's for chickens not the sprouted forage market. How about $430 dirt weight?
17. Farmer: ok, if you take it al by Christmas
18. Me to customer: how about $430?
19. Customer: Deal. Can I have 6 months?
20. Me: you have until Christmas.
21. Customer: close enough. Tell Walt thanks.
22. Me to Farmer: you got a deal Walt. Let me write this up. Now you'd better go plant some barley!
23. Farmer: thanks James, see you at the ballgame.

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