Here’s an e-mail I recently received from a person in the cow-calf business:
“Why would a young guy ever want to get into beef cows? We are being challenged in many ways: shortage of feed, expensive feed, cropper guys are bidding 2-3 times on the rent for our pastures and hay ground, and we are growing old as an ag sector… John, why would a young guy ever want to get into beef cows?” Signed, poor old beef cow guy.
So much information, all the time. We are positively drowning in it.
Don’t get me wrong: information is critical to a farming operation. But the real value isn’t in the news itself, not in the many facts or opinions or speculation flowing your way every second of every day. I believe the real value is in the filter: making the connections between the information that matters, drawing out the insight where possible, and letting the rest go.
In recent newsletters for our subscribers, I predicted that the drought-driven bull markets would eventually attract a lot of media coverage. Coverage about the drought’s impact on food prices. About food security. About climate change, even.
The current market situation is a historic one: we are seeing devastating drought in the US, but good crops in Canada. Disaster for American farmers, bounty for Canadians. Dramatic upward revisions for crop profits are taking place. This week saw one of the biggest rallies ever for corn futures; soybean futures were driven to the highest level in four years and came within 20 cents of their record high; and wheat futures jumped the most in 16 years.
Wondering when to hedge, or how to do it successfully? While each situation is different, the following tips may provide some guidance around when to hedge, and how to get the best results when you do.
1. Decide whether you’re hedging to lock in a good profit for your crop or to make a buck in futures. If you’re doing it because it makes sense for your farming business, it’s probably a good decision. If you’re doing it just to make some money trading futures, you’re embarking on what could be a slippery slope of painful speculative losses.