What is in this article?:
- Listen closely and commodity markets will tell you how to price a crop
- Sources of uncertainty
• The market is a living and breathing thing. It has a heart and a pulse. And, the central nervous system (brain) of all major agricultural markets is located in the trading pits and programs of the commodity futures markets.
Anything to do with economics, especially prices, is frustrating to most managers.
Nevertheless, a simple fact is: “The only follow-through to a good job of production is a good job of marketing.” Good marketing takes price savvy.
Price savvy begins with recognizing that there is no such thing as “the price.” The marketing system, throughout the marketing year, will offer opportunities to sell at many different prices. You must be prepared to recognize and take advantage of pricing opportunities.
Making the most profitable decision takes a mechanic’s knowledge of the price making machinery — the market. A manager needs to know how the market thinks, feels and functions.
The market is a living and breathing thing. It has a heart and a pulse. And, the central nervous system (brain) of all major agricultural markets is located in the trading pits and programs of the commodity futures markets.
Traders use available information to buy and sell futures contracts and these trades determine futures contract prices and, therefore, cash prices.
Managers must learn where to read, how to read, and how to react to changes in the market’s mood. This means understanding the reasons behind price ups and downs, how the grading system relates price to value, when storage pays and when storage does not pay, how a combination of cash and futures markets multiply your marketing alternatives and how to use information to select alternatives.
It means listening to what the markets are telling you.
On March 28, the KCBT July wheat contract price declined 55 cents. A few days later, the KCBT July wheat contract price increased 59 cents. The wheat market is expressing excessive uncertainty.