In today's challenging agricultural market cycle, farmers are advised to shift their focus from pursuing maximum prices to protecting the equity they've built over recent profitable years.
"We're going into that phase of the ag cycle where we really need to be defensive in our marketing," says Arlan Suderman, chief commodities economist for StoneX Group Inc.
The quest now is not to get the highest price. Speaking on Ag Marketing IQ In Depth, Suderman says it’s more important that farmers protect their equity.
To protect their equity, Suderman says, farmers should know their break-even costs and be willing to accept prices that minimize losses, even if it means marketing at unconventional times or using unfamiliar tools.
Use on-farm storage strategically
On-farm storage presents potential opportunities when approached strategically. The key advantages are improved basis opportunities after harvest and market carry.
Suderman does not recommend deferred pricing contracts. “They're very good for the grain buying companies. They're not so good for the farmer in most cases,” Suderman says.
Looking ahead, Suderman reminds farmers that what goes down does eventually come up.
"The markets do go in cycles. We tend to get a bull market type of cycle about every 10 years," Suderman says.
If that pattern holds, farmers can expect a few more years of difficult conditions before the next upturn.
With that in mind, Suderman says: "We really need to focus on survival mechanisms now to make sure that we're in good position when that next bull market comes."
To hear more from Suderman about where this market is and how farms can survive this trough, watch Ag Marketing IQ In Depth.