Farm Management Minute: Do you have any tools still in the package?
SD Center for Farm/Ranch Management
Do you ever buy, or receive as a gift, a tool that you are apprehensive of using? Today, I’d like you to search your farm management “toolbox” for anything that is similar to being stashed underneath wrenches in a tool chest or may still be by your chair from Christmas gift exchange. I am often guilty on both charges. Most often you are leery of the time it will take to train yourself to use it and the assumption that it is not needed. To spare you from the whole course of evolution, I want you to just think back only one or two generations. 1) Motor vehicles, electricity, running water. 2) A tractor, then a tractor with “live” power, then with a cab and a/c, all the way to GPS guidance. 3) Advancing stages of agronomy & pest management practices. 4) Telephones in all stages from party line to smart phone. In every step along the way there was an apprehensiveness on their performance and fear of the wasted investment if they didn’t work.
The above paragraph is a reference to some of the risk management tools we have available in agriculture today. If we don’t fully understand how they work, we are leery to try them. That is only the half of it. If a tool doesn’t perform or is not used properly it can be very costly. As with all of the above innovations, they likely were not or still are not the best choice all of the time. There is a time and a place for a ratchet, impact wrench, or air hammer, but a simple combination box end /open end wrench can still be the best choice at a given time.
I often hear negative comments about the futures and options markets. I feel as though they are fueled by a lack of fully understanding the opportunities and consequences of taking a position of any kind in the marketplace. Yes, it is risky and scary, but whether forward contracting, making a cash sale, futures trade, option purchase, storing grain or placing an animal in a pen you have taken a position with some level of price risk. If you have had a negative experience by using any of the items stated in the first paragraph, did you throw it across the yard? If yes, I’ll bet after learning what the problem was you may have found that you had not properly educated yourself or you had incorrect expectations of what that particular tool was capable of. Examples: You shouldn’t put a 4’ cheater bar on a 3/8 drive ratchet….. When you first got a loader with a joystick control did you experiment with a full bucket? Take things slow and experiment with an “empty bucket” by making a couple mock trades with margin requirements, futures and basis prices changing from your desk. Whether you use paper or poker chips, a visual of your trade position fluctuating daily may be helpful. The profit or loss is not determined until you exit the trade and/or sell the commodity.
MTI is offering a marketing class beginning January 31st. It is five sessions spread over four weeks. As with any workshop, no matter the level of your experience or knowledge, something often can be cultured just by putting your mind and body in a position to learn more.
Please bear in mind your crop insurance policies for the upcoming season. Your agent likely has been in contact with you. The specifics of each crop’s prices are finalized after the close of February futures markets. Some close assumptions can certainly be made for drafting your policy. Crop insurance is a very important tool available in the chest. The premiums are subsidized, and your agent works for you so ask them any questions you have. Make yourself understand it and use it in the way that is the best fit for you.
If you are interested in how our farm/ranch management program may be of assistance to your operation, contact me at 605-995-7191, firstname.lastname@example.org or for more information: http://www.sdcfrm.com