Hedging and its Psychological Toll

Your job as a farmer is to raise the very best crop possible and sell it. However, deciding when, where, and how to market or sell your crop, like so many things, is much easier said than done. Hedgers and speculators alike can easily be moved to sell by news, emotion, or the fact that they’ve made a lot of money at current prices.

Everyone wants to sell 100% of their production at the market’s all-time high, but aside from making a deal with the devil himself, or sheer luck, the likelihood this occurs year-after-year is slim to none.

Tip #1 - Try to average in the upper third of the available price range over time.

Your goal should be to average in the upper third of the available price range over time. This means that sometimes you’re selling into rallies and other times you’re selling into declines. Regardless of when you decide to sell, it’s likely there will be a psychological toll.

Tip #2 - Be Patient and Maintain Your Position

Often, the hardest part of marketing is being patient and maintaining your position after you’ve made the decision to sell. Most farmers know how incredibly difficult it can be to price X% of your production on Monday morning, only to check it later in the day to see corn prices are up another 10 cents/bu.

Tip #3 - Ignore Coffee Talk

It’s tough to hear your neighbor crow about being unhedged and able to capture the $0.30 rise in prices, while you’re stuck making margin calls every day. Not knowing whether you made the right decision is mentally taxing and can turn a good marketing plan into a mess.



Moving Forward

That’s why moving forward, I plan to add something of value to this section of the blog each month. I legally cannot and will not make marketing recommendations, but I can explain the marketing tools available to you and how to properly apply them.  My goal is to make you feel more secure in the marketing decisions you make for yourself and your operation.