New Year's resolutions -- the rarely kept promises we make to ourselves pledging to become a leaner, wiser and an all-around better version of ourselves. One study found that 88% of people who make a New Year's resolution fail to keep it. Just pass me another glass of champagne, please.
I'm not a huge fan of most New Year's resolutions, but the turning of the calendar offers a prime opportunity to reflect on the past year, successes and failures alike. There's a lot of value in that process, and while it might be tough, it's probably a worthwhile task when it comes to grain marketing. Goofy weather following a drought year made everyone hesitant to forward price their corn in 2013, and now it appears some of the best marketing opportunities are behind us.
Farmers know there are tougher times ahead. I spoke with Lake Village, Ind., farmer Kurt Line before Christmas, and he said demand destruction was one of the painful things about the 2013 grain markets.
"There was no real single event. Coming out of a tight carry-out year, it was kind of like death by a thousand paper cuts," he said. "It just ground the market lower all year."
Line, like many farmers, knows he'll have to make changes in 2014.
"You have to be sure to keep your cost of production competitive, whether that means keeping control on land costs or all input costs," he said. "And when the market allows you to sell at a profit, you need to do that. The past several years it didn't matter when you sold, it was at profit. Try to sell and take some chips off the table whenever there's an opportunity."
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I'm sure plenty of folks will be playing poker on New Year's Eve, so I think Line's analogy is a good one.
In the beginning of December, a DTN 360 Poll asked farmers what they need to accomplish in the coming year to manage tighter margins. A lot of what Line mentioned made the list, and I thought the results were interesting. There were six possible answers to the poll question, broken out below.
-- 28% said they need to find input suppliers who will work with them on pricing
-- 17% said they need to renegotiate land lease rates for 2014
-- 24% said they need to become more comfortable using futures and options to forward price the crop
-- 18% said they need to become more aggressive in using futures and options to price farther out than previous years
-- 2% said they need to get control on employee benefits costs
-- 11% said they need to cultivate better relationships with lenders to keep capital available
Remember that 88% failure rate I mentioned above? I'm referring to a 2007 study that involved about 3,000 people. The researchers found that if men engaged in goal setting (aka lose a pound a week vs. lose weight) they reached their goal 22% more often. If women made their goals public and got support from their friends, their success rate increased 10%.
The things you need to do in 2014 to manage tighter margins are much more important than New Year's resolutions, but you can apply some of the techniques that contribute to successful resolutions to your business. Be detailed about your business goals in 2014. Set achievable benchmarks, and communicate that plan with everyone involved in the farm. Maybe there's a peer marketing group in the area you could join.
If you're one of the 24% that want to become more comfortable using futures and options to price grain, perhaps a good place to start is CME Group's Self-Study Guide to Hedging with Grain and Oilseed Futures and Options (http://bit.ly/…).
I wish everyone a happy and safe New Year. Whether or not you make a resolution, I wish you the best of luck in navigating the markets ahead.
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