Every now and then, we read something from the UN and other organizations about the hopelessness of feeding the world. We also periodically see complaints about high food prices.
Those of us involved with farming are well aware of the ideas promulgated by some members of the media that population growth will outstrip farmers’ ability to produce food. We recognize too, that millions of people have been moving toward income categories that allow for higher protein diets in developing nations which could mean more demand for the food we produce, especially meat. The past several years have ushered in increased media coverage about these issues, raising questions as to whether farmers will be able to meet the seemingly insatiable demand.
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”.
There are many reasons I love being involved with agriculture and food. Among them, the fact that agriculture is a core industry – one that keeps evolving, keeps innovating, and will continue to be a foundation for our country and the people of this world who need to eat.
Put simply, agriculture is a true contributor to the health and well-being of our society and the wealth of our country. Or put even more simply, it is a value creator.
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.