Eliminating Risk

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Here we are looking right into the face of the 2015 spring planting season!  Exciting!  Mostly because farmers like to see things grow, but another thing that makes it exciting is the fact that we don’t know the outcome.  We hardly know the weather for next week much less the weather for the summer.  We don’t have any guarantee that the demand will be the same come harvest.  We don’t know how the crops from out west or even other countries will affect our price.

  Do you know that moment when you realize you have lost money. I’m not taking about the “I thought I had a twenty in my wallet?”. I’m talking about the “I worked all year and I’m selling my crops for less than it cost to raise them.” It’s the kind of feeling that makes you sick to your stomach, and angry at yourself wondering what you could have done differently.

  While that thought is in your head, I would like you to meet Robert Harper.  He could tell you what you could have done differently.  Mr. Harper is a Grain Manager in the Commodity/ Marketing Department with the Virginia Farm Bureau.  His job is to connect the buyers with the producers.  Much of what he does deals with helping farmers forward contract their grains to help manage risk.

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  One of the keys to managing your risk, regardless of your product, is knowing your break even cost.  That gives you a starting point when trying to make the decision of when to sell.  A lot of the time you have people concerned about forward contacting because they don’t want to “leave money on the table”.  But isn’t it a bigger risk not booking your crop when you are guaranteed a price over your break even?

  Mr. Harper suggested a theory to help spread out your risk by marketing in 25% increments:  Pre-planting, Planted, Flowering, and Harvesting.  So here we are at pre-planting for most of Virginia.  Now is the time to learn a little more about what the Virginia Farm Bureau Grain Marketing Division can do for you.  Check out their website here for more information.

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I’ll leave you with possibly the best advice from Mr. Harper…

Don’t be Optimistic. Don’t be Pessimistic. Just be Realistic.

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