“We help producers in forward contracting with merchants and various re-sellers in the industry, but we also manage risk, using futures and options. We also manage risk using Federal loan programs associated with grains and cotton, and we use those to have a long term goal of profitability.”
John Miller is an agricultural marketing consultant and he says most producers probably understand that some of their better selling opportunities will be well before harvest.
“In fact, right now is a very unique time in the past decade to where a farmer could actually sell at profitable levels, not only for an upcoming harvest, but for as far as 2 years beyond.”
This creates a trade-off between the producer and the buyer.
“The benefit for the grower is that they can use a merchant to lock in forward prices. The advantage for the merchant is that they will have the right to handle that commodity and understand what their obligations areas far as 2 years in advance.”
Dr. Miller says there are a few other things going on that producers can take advantage of.
“With the advent of more electronic trading on the commodity exchanges, with more non-agricultural participants in the commodity markets, situations are being created where we can have higher highs, but we also have to respect the fact that we could have lower lows.”
So while some producers may be working their grandfather’s or great grandfather’s farms, it’s a pretty safe bet they’re not using his marketing plan.