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JimMeade
Veteran Advisor

Marketing - The Wisdom Of The Crowd?

Aristotle suggested that a crowd of men (in those days it was all men) could be wiser than the individual man.  The average of the crowd could be better than even a good man.  Well, that sounds good.  Rolls right off the tongue.  It's kind of like you'd rather have a jury trial than a judge (the French use a panel of experts rather than a jury of peers for some technical trials so that shows that not all agree with the wisdom of the crowd).

 

Does "wisdom of the crowd" fit in a fundamentalist approach to marketing?  Or is there always arbitrage - someone who sees an imbalance and can make money out of it before others wake up to it?

 

There is a group called "Good Judgment" that claims that some people are better than others at predicting and that if we all work together on a question we will all get better.  That sounds like the wisdom of the crowd.

 

When it comes to the wisdom of the crowd, my first question is who is responsible?  If the wisdom of the crowd is that I should sell corn today and it turns out to be wrong, who pays?  I do.  The crowd doesn't have any skin in the game.

 

I'm not so sure about this wisdom of the crowd when it comes to selling corn.

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36 Replies
clayton58
Veteran Advisor

Re: Marketing - The Wisdom Of The Crowd?

Are you distinguishing between the wisdom of the crowd of ordinary people, vs the crowd of "experts"?   When it comes to marketing the wisdom of the "crowd of experts" seems to be lacking.  Not saying the ordinary bunch is doing any better tho.   HMMM   food for thought 

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Farmerjoe79
Senior Contributor

Re: Marketing - The Wisdom Of The Crowd?

If your happy with the price just sell it👌. There is always next years crop.
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roarintiger1
Honored Advisor

Re: Marketing - The Wisdom Of The Crowd?

"Crowd of marketing experts"?    There isn't one expert.....let alone a crowd of them.Smiley Wink

 

BTW, Good post Jim!

 

When the crowd leans to the left, I'm leaning to the right. Smiley Wink

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erikjohnson61y
Veteran Advisor

Re: Marketing - The Wisdom Of The Crowd?

"Experts" try to make marketing your grain too complex - charts and intra-day high and lows and WASDE reports and such. And they make very simplified assumptions about the farmer who is selling, whereas that is actually more complicated - what are my costs? What are my cash flow needs?

 

Just like with crop production, every farmer has his method of selling and I'm not going to tell anyone to use my method because my underlying criteria are different. But I'll share my method with others if they're interested, and maybe they'll adopt a component of it into their strategy.

 

First off I'll admit that a lot of people won't be able to use my system because it requires enough working capital to take advantage of prepay discounts and delayed selling. I buy my seed in October of the year before I plant, and sell 2/3 of my crop in June - October the year after I harvest it. I time the payments for my equipment loans at FCSA to be in July and August when the checks are coming in.

 

I can store 2/3 of my crop in my bins. The other 1/3 I typically contract for new crop delivery in June or July of the preceding year to take advantage of the carry. These are insurance protected bushels so I can get away with that from a risk perspective.  Might prices jump up in the mean time? Often they do, but rarely enough to overcome the decrease in carry. I sell what's in the bin during the spring rallies for June-October.  Again, I find that although the summer rally may get a better board price, basis is often (much!) wider in summer, so contracting in the spring is usually better.

 

How do I decide when to start selling?  I like to think in terms of per acre rather than per bushel.  I want to make a gross profit of $200/acre for the ground I own and $100/acre for the ground I rent. (I am a small farmer - less than 1000 acres). Excel spreadsheets are my best friend - I relentlessly track my input costs for my costs/acre.  I add $200 to that to get my desired revenue, and divide that by my average yield for that field. That's my starting point for selling, and it's usually around $3.50 for corn.  I cannot get that selling cash to the local elevator, so I bought a truck and haul my crop 90 miles to an ethanol plant in the next state (Nebraska). But this plant has offer prices on their website, usually out 18 months.  For example, at this moment they are offering $4.06 for July 2019 deliveries, and I have already sold some for delivery then.  When the price exceeds my target, I start selling in small increments, as I know I am making my profit objective.  After prices peak, I keep selling in small increments until the price drops below my target.

 

Selling up to 18 months in advance gives me several opportunities to sell weather or technical rallies before I HAVE to empty the bin to make room for new crop.

 

As I said before, everyone (should!) have their own system that works best for them. Try to tweak it year by year to make it better and more robust.

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Hobbyfarmer
Honored Advisor

Re: Marketing - The Wisdom Of The Crowd?

Is it the "wisdom of the crowd" ?

 

Or just Mob rule?

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BA Deere
Honored Advisor

Re: Marketing - The Wisdom Of The Crowd?

3 million more voters voted for Hillary, so much for "crowd wisdom", our only salvation was the electoral college.  🙂

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BA Deere
Honored Advisor

Re: Marketing - The Wisdom Of The Crowd?

Isn`t there also a "contrarian viewpoint" that purposely avoids what the crowd is doing?   The job of the market is "to prove the most people wrong".

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deasmatt90
Senior Contributor

Re: Marketing - The Wisdom Of The Crowd?

I believe at the end of the day we are individually responsible for sales, and there is no perfect exit.

When I say exit what I mean is that when we produce commodities that are traded,it is the same as having a long position in the market paid for by our input in the crop. When we sell, we do so on market conditions the same as if we had bought contracts on the exchange.

Experienced traders will tell you that there is no perfect exit from the market. Only odds of trades in reference to numbers of winners compared to losers. For me to apply this to my strategy for my crop sales is to have an exit strategy! Learn the support and resistance lines, look for indicators of a breakout above resistance and scale out of my position. When I do this, having a strategic plan, and sticking to the rules of my plan with strict discipline, I'm able to sell my product carefree, at a profit (maybe not always the top of the market for the year for every contract but definitely above market year average). It's hard to lose when you follow smart money( that's why they have it!) but what's harder is learning how to spot what smart money is doing! That's not reported in the news,( if it is, they want retail to know for a reason),and much less transparent on CME then other trading exchanges.

Ba Deere, ahh the "contrarian traders" yes it is an actual strategy by many traders. A lot of them like to play the "dead cat bounce" mostly in small cap and pharm stocks. Dead cat bounce? What happens when a cat hits the ground from a twenty story building ? Bounces off of the ground 6 feet before landing back on the ground again! Lol



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deasmatt90
Senior Contributor

Re: Marketing - The Wisdom Of The Crowd?

Hobbyfarmer definitely mob rule! More like cattle being herded to the pasture or pin of the herders choice, but every once in a while the cattle win and break away and the herder has to come back later and try again!lol
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