Beating the Average Price

by John DePutter, May 17th, 2013
As market analysts and advisors, it is our job to not only help farmers with decision making, but also to help them contextualize the decisions they do make – to put those decisions into perspective, and move forward with rational and strategic plans.

I say this because one of the most difficult things about the markets is the psychological aspect. It’s hard to shake a feeling of “what if”.

As I explained in a recent newsletter, it’s the nature of the game to win some and lose some. Being perfect in any scenario is impossible, but particularly in the markets. Inevitably, when markets are trending up, you’ll wish you sold less and when they’re trending down you’ll wonder why you didn’t sell more.

It’s risky to be an all or nothing player, aiming to hit the top with most or all your crop. Doing this will sometimes result in hitting the bottom of the market with a big chunk of production. Your returns will be volatile.

However, by making sales into rallies, avoiding dips and spreading sales throughout the marketing year, you have a good chance of selling your crops at a price that’s above the average. Hence our approach of incremental selling.

Using a simple, incremental approach means you can make a mistake and it won’t be a big one. You won’t be holding all your crop for a great bull market but you’ll usually have at least something to sell. You won’t be caught holding everything for a terrible bear market.

When you look back and check your results, we suggest an approach we callbeating the average price.

Beating the average price simply means this: if you look at the incremental selling you did over a marketing year or another defined period of time, did you get better prices than most farmers received?

If you can consistently beat the average price by a little, you will have an edge. We recommend tracking and comparing so you know where you’re falling in compared to the average prices. It’s not as sexy and exciting as riding the big rollercoaster and going after master wins – but in the long run, you’ll probably do better.

This isn’t just something we help our customers with – we use it to evaluate our own recommendations all the time. This way we can look back at how we’ve counseled our customers and ensure that our approach, if followed, helped them achieve above average marketing results on the whole. It also gives us an opportunity to continue learning and improving.

If you adopt this approach into your own marketing program, and your personal evaluation of your results, chances are you can feel good about the overall results you’re getting, rather than getting hung up on what might have been missed in the moment.

It means not just better prices, but better peace of mind, too.

(The Ag-Alert reports for Ontario and the DePutter Market Advisory Service for Western Canada offer ongoing sales recommendations to help farmers make sales at prices that exceed the average prices.)