Market News & Headlines >> Brock Consultant Katie Hancock's Blog: Tips for Marketing Through Uncertainty
Insights from Brock Associates Consultant Katie Hancock
I joined Chip Flory on Market Rally Radio this week. My area of western KY and northwest TN is of heightened interest right now because it’s been drowned with rain. Farms here have, at the most, 10% of their corn planted. Many if not most farms haven’t planted any corn at all. Our conversation led into risk management ideas for times when there are not only unknown market prices, but also unknown production potential.
Chip mentioned markets are in the discovery process right now. To me that’s like a ticking time bomb. When the market decides there’s no turning back if you need to catch up. Last week’s Brock Report pointed out that some of the best marketing opportunities and key decisions can be made during busy planting or harvesting seasons. But after waiting all winter, farmers are excited to be in the field and marketing is often ignored.
Another point that caught my eye from the Brock Report last week was the fear of forward contracting and not having the grain to deliver. I like to point out that farmers aren’t necessarily ignoring their marketing plans. They have legitimate reasons to push marketing aside. An excuse is an excuse, but I will defend those reservations to a certain degree.
How do I sell in uncertain times? I really like using futures contracts if I have a short-term issue. Obviously, no one should ever hedge something he’s unlikely to produce, but there’s a high level of flexibility in getting out of a futures contract that helps you sleep at night. You’re not locked into a cash contract and it’s cheaper than buying puts. You may have a small loss with futures, but risk management has never been about greed.
There’s always a happy medium. If you're waiting for the market’s direction to shake out and don’t know what to do, it’s always realistic to make a very conservative move by selling a small amount—using whichever tool you choose. Ways to be conservative could be cutting yield and/or acres in your marketing plan. I’ve heard of very little corn sold here, but if the Midwestern Corn Belt makes a solid crop and a portion of the southeastern Belt doesn’t, you can’t defend a bullish case, and therefore can’t plant this crop without having protection. Don’t fight to plant a crop that’s unprotected!