Typically, we have 24 months in which to market every crop - 12 months before harvest through 12 months after harvest. Traditionally, it has also paid to take advantage of this time by spreading both your sales and your risk.
In the last two years, marketing decisions have separated farmers' incomes dramatically. This coming year probably won't be much different. Three ingredients will be necessary for successful marketing over the coming months. They include:
Develop the proper attitude. Having a positive mental attitude in marketing is similar to having a positive mental attitude in sports. Knowing that over half of your success is determined by controlling your emotions of greed, hope and fear is significant. Luck plays a limited role in marketing.
Understand your decision-making environment. You don't need to be a large corporation to know how important this is. Knowing how and when to make a decision is crucial in marketing. If you're worried about someone within your own family second-guessing your decisions, it's nearly impossible to be logical. Too many people are "frozen" after the last two years and unable to make decisions in this environment.
The first step in solving any problem is to recognize what it is. This is one of the biggest issues facing farmers today.
Put the past behind. If you're still worried about last year's marketing mistakes, you'll never be able to concentrate on making good decisions this year. For new-crop soybeans, this will also likely be a year when you should collect your LDPs (loan deficiency payments) early and sell late.
Why? Actually, there are many reasons why this strategy will work over the coming 12 months. A few of them are:
* The opposite strategy has worked the last two years. Particularly the most recent year, it paid to be an aggressive forward seller on contracts and then collect the LDPs later when you were delivering against the contracts. Rarely does the same marketing strategy work two years in a row.
* Prices are cheap! At any price level, no matter how bearish the fundamentals are, ask, "Do we really have a surplus of $4 soybeans?" I think the answer is clear - we currently have a surplus of $7 beans and we'll run out of the $4 variety.
* Your neighbors will likely sell early this year because they learned their lessons last year - storing beans and speculating on them doesn't pay.
At the end of an extended bear market, which we've just witnessed, one of the most common mistakes producers make is to sell too early on the first rally.
It's human nature that people compare today's price to the highest or lowest price of the last six months. On the way down, people store because it's lower than where it has been. Once the market turns higher, people start to sell because it's higher than where it was last week. It's totally illogical, but that's just human nature.
Parting thoughts: Over the last 20 years, many people have given lip service to the importance of marketing. But it's really only in the last 12 months that many have started to take it seriously. With the concept of marketing loans, the rules have changed, which increases price volatility and risk.
It's never too late to learn marketing.