| Dr. Paul Gorman's Commentary- Paul just completed twenty years as a farm business management instructor at South Central College in North Mankato, Minnesota and recently retired from forty-two years in public Agricultural Education. He has just completed his term as past-president of the National Farm & Ranch Business Management Education Association and is beginning service as a director of the Farm Financial Standards Council. Paul has had a long standing interest in integrating production and financial information in farm accounting and in driving costs to the field or animal group level. Paul grew up on a 1600 acre farm/ranch near Platte, South Dakota and earned degrees at South Dakota State University, Mankato State University, and the University of Minnesota. Paul’s new venture is providing independent farm financial planning and consulting services to farm business and related agribusiness through ELCEL Solutions, Inc. Contact Paul at drpaulgorman@yahoo.com or at 507-420-0138 mobile or 507-387-7041 home. |
Did We Need the Russia/Ukraine wheat drought to save our 2010 grain marketing program? If so, did we take advantage of it? 08/25/10 8:44:43 AM
Producers who entered the post planting period this Spring without significant forward sales of the 2010 crop watched in dismay as new crop price prospects drifted downward during the Summer months. Many of these relatively unpriced producers would have been thrilled in early July to have the opportunity to get $3.75 or better for new crop at harvest in a period when it appeared that new crop bids would drift to the $3.00 range or lower. I had a chance conversation recently with a producer who had no new crop priced and suggested he get to 50% sold that day at the locally available $3.73 and reiterated that the wheat shortgage price spikes were a true gift and 2nd chance to corn producers. He seemed a little surprised and said "50% in one sale-Isn't that a little extreme?". No, I replied. It is the 10% you might have done a year ago and the 20% pre plant sale and the 20% early growing period sale. This is your opportunity to catch the sales you missed.
I have heard Dr. Danny Klinefelter of Texas A&M speak in North Mankato and in Fargo this year. Each time he has told the story of a South Dakota producer who calculates breakevens for expenses, debt service, depreciation, and family living. This producer adds $.20 cents to that corn breakeven number and places a standing order with his elevator to sell 80% of his expected production IN ONE SALE. This order is placed a year ahead of planting and stays in place until filled. This producer told Klinefelter that in the past 15 years; that order has never failed to fill. Even in low price years like 1998-2002; those prices were available for a few days sometime in the year before planting to the ten months after harvest.
This is business thinking. This is strategic positioning. This is discipline. This is marketing made simple. I am not advocating that specific approach but point it out that we have too much risk to not price at profitable levels while waiting for some unidentified higher price that we have not named. It appears this week that the high for the wheat shortage hoopla is in as prices have dropped somewhat. Should we still sell at current level? Producers who have little new crop sales should price all that they cannot store immediately and protect themselves from further basis erosion and somewhat predictable futures declines into harvest. Let's be grateful that the misfortune of Russian & Ukrainian wheat producers have given us another chance to price our production. Happy Harvest preparations.
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