Better Farming December 2016 The Business of Ontario Agriculture 39 advisers, government ministries, etc., to help you to determine your cost of production. You need to understand your costs before you determine the price at which you’ll sell your crops. Commodity marketing involves great discipline. Based on the trends and analysis you review for the crop year, decide at what price you will pre-sell. This decision should be made in January. Then, when the crop reaches that price later in the growing season, enter into an agreement – even if the trend shows the price may continue to rise. “A number of people play the ‘what if ’ game,” says Maurizio “Moe” Agostino, chief commodity strategist with Farms.com Risk Management. “They wait because they cannot commit to a price in case it keeps on going up, but then when the price falls it’s too late and they can’t pre-sell at a great price. Marketing is more of an art than a science, but if you are disciplined and stick to your pre- defined plan, you will likely succeed.” The best strategy may be to get into commodity marketing slowly, and to be disciplined about it. In the first year, perhaps experiment by only pre-selling 25 per cent of your crop. The following year, if all goes well and you are more confident, try 50 per cent. Depending on your ability to handle stress, perhaps you never pre-sell more than 50 per cent – and that’s okay. If you make five per cent more on 50 per cent of your harvest, it is likely worth your efforts. Make 2017 the year to conquer your marketing fears! BF Glossary of common commodity marketing terms Basis: the difference between the cash price of a commodity and the price of the nearest futures contract (the contract which is next to expire). Cash – futures = basis. Bear market or bearish: a market where prices are trending down- ward. Bull market or bullish: a market where prices are trending upward. Forward Contract: agreement to deliver a certain amount of com- modity at a certain date for an agreed-upon price; each contract is unique and specific to both sides involved. Futures (Contract): a contract or contracts covering the sale of a commodity at a future date and agreed-upon price. A futures contract usually outlines the quality and quantity of the crop, as well as the delivery time and place. Futures contracts are similar to forward contracts, except the former are more standardized – with the same date and quantity for every- one. Hedge: using different financial transactions to reduce (hedge) a farmer’s risk. A hedge may be the use of a forward contract, futures contract, etc. Margin: cash posted by a farmer as a guarantee of fulfillment of a futures contract. (It is not a down payment.) If this article has helped you begin to conquer your fears and you want to take the next step, visit www. farms.com/market-school to watch educational videos on commodity marketing. BF BUILT TO KEEP GOING. BECAUSE A FARM NEVER SLEEPS. For nearly 170 years, our customers have helped us engineer better tractors. The versatile new Massey Ferguson® 7700 Series is no exception. It packs the power and performance of a row crop tractor, on a frame and suspension that makes it nimble around the barn, too. Plus, the new Engine Power Management System monitors load to boost horsepower and performance. And maintenance-free SCR technology cuts downtime and operating costs. FROM MASSEY FERGUSON A world of experience. Working with you. Massey Ferguson is a worldwide brand of AGCO. www.masseyferguson.us ©2015AGCOCorporation.AGCO isa registered trademarkofAGCO.MasseyFerguson®,MF®, the triple triangle logo®, isaworldwidebrandofAGCO.All rights reserved.MF15P084CRv01 C.L. BENNINGER EQUIPMENT Chatham DAN R. Gananoque, Plantagenet, Winchester ELLIOTT FARM EQUIPMENT Pembroke MAPLE LANE FARM SERVICE Mount Forest MCKEOWN MOTOR SALES Springbrook SHANTZ FARM EQUIPMENT Alma W.J. LAMBERT & SONS LTD. Beaverton BETTER BUSINESS