By: Brian Cullen
Let’s talk about a phrase we like to call Seller’s Remorse. You may be asking, “What is it and how does it happen?” We will answer that question in greater depth later on, but it is more important to know how it can be avoided! Seller’s Remorse is the feeling you get after making a decision on a cash sale that you’d like to have taken back.
When only selling cash grain two scenarios exist; you are either selling TOO early or holding TOO long. Let’s look at these 2 scenarios when dealing with ONLY CASH SALES.
Have you ever sold grain too early? Of course you have, so you know the feeling of regret. You sold 6.00 corn last month and look where we are now? Do you think it can happen again? Of course it can and you know it will…so let’s talk about it!
If you had used the markets, then you could have participated in the move higher after the cash sale.
Or, have you ever NOT made a sale that you wish you would have?
Last year when the corn market was trading at $7.70, like it is now, were you fortunate enough to unload some bushels at that level? Or were you waiting for $8.00 and missed out?
This time it’s your other fear—the fear of holding too long. It is important to note, however, that we didn’t get to 8.00. In fact, quite the opposite, we went sub 6.00…in 1 month!
Quite simply…CASH SALES ARE NOT ENOUGH.
It is my belief that many of you know this already. And I also think there are a growing number of producers that are starting to come to this realization as well.
Now, as a farmer you are in an interesting situation because you can potentially remove these feelings of Seller’s Remorse by using the markets.
Let’s take a look at 4 reasons why Cash Sales are challenging:
The timing has to be perfect
When the stakes are high you have no margin for error.
Cash Sales are a Double-Edge sword
You either sell TOO early or hold TOO long
They provide NO Flexibility
Your decision is very black and white. Time and price are fixed.
Your decision is final!
When you make a Cash Sale….that’s it…you can’t take it back
When thinking back on these decisions to SELL or NOT to sell, did you use the Futures and Options markets to assist you?
Did you sell too early?…you can potentially FIX IT
Did you hold too long?…you can potentially FIX IT
The markets allow you to combat both of these fears by providing you the flexibility to play with both price and time. The markets can be weaved into your decisions to compliment your cash sales and assist with the hedging and marketing of your crops.
I know you may be apprehensive about using the Futures and Options markets. But never forget that…
And if this is what you are up against, and if you ask me, I would be more apprehensive about ONLY dealing in cash sales.
Perhaps you are thinking of selling some grain but want to remain involved. YOU CAN DO THAT!
Perhaps you’re going to hold your cash grain but want to protect some of your downside. YOU CAN DO THAT!
The 21st century has changed these markets forever and cash sales only are no longer enough!
As funds continue to pour into the markets and speculative trading volume continues to soar, the markets have gotten extremely volatile. There are more eyes on the data than ever before. We have USDA numbers and export sales, weather reports and SA production updates. It is crucial for you to recognize this and to adapt accordingly.
So the question I would ask you is “What are you going to do? It’s YOU versus these markets!” And in my opinion, when you do not have a plan in place, you will do nothing! Or when you feel overwhelmed you will do nothing!
LOOK where we are now and think where we could be going? With your livelihood at stake, are you willing to bet on it? Will you let your livelihood rest solely on the shoulders of chance and hope for the best?
You don’t want to sell too early BUT you don’t want to hold too long. Chances are you are about to do one of them! You need to consider using the markets to protect against those feelings of regret.
Rule #1: Look to Re-Own the Board After a Cash Sale
You can continue to participate in any market rally after a cash sale by using the board.
Rule #2: Reward the Markets and Yourself by Locking in Prices at Acceptable Levels
The goal is to have the futures and options market compliment your production.
You work too hard to produce your grain to not spend time working to sell it well.
Follow the Moves of a Technical Trading Expert
I am a seasoned market technician, and with the Cullen Outlook newsletter, you can follow along with every trade I make. You will receive concise, easy-to-understand trade recommendations directly from me. I will tell you what I am trading, why I am trading it, and how I am trading it. Make informed decisions and take action with confidence. Sign up for a free subscription to The Cullen Outlook.
Wow! Great article.