Jon Scheve with weekly market commentary made on August 31, 2024
Today is the official end of the 2023 marketing year. Therefore, it is a good time to review past performance and consider any changes I want to make going forward.
As I have stated previously, my preferred marketing strategy performs best during declining and range-bound markets. However, this does mean I will sometimes miss out during market rallies caused by unpredictable events like 2010 and 2020. So, how has this strategy performed over time?
Reviewing My Strategies Long-Term Performance
As I shared last week, the best strategies work 75% of the time while the worst strategies work about 25% of the time. To evaluate my performance, I use the national average farm sale price published by the USDA in the WASDE reports as a guide.
This price is compiled by the USDA and is based on the cash values the average farmer is receiving. It appears as if this price is very close to a zero-basis value, meaning that the prices received by the farmer are very close to what futures are trading on these average farmer sales in the USDA number. I think this is the most accurate and fair assessment of sales made by average farmers in the US and allows me to compare how my strategies stack up against what the average is.
Evaluating Years - 2019 to 2023
The chart below shows I missed the run up in 2020, while I was also slightly below the national average in 2021 and 2022.
However, I made up for those years with my strategy in 2019 and I did really well comparatively during the market decline of 2023. I finished 14 cents better than the average farmer price when comparing the last 5 years as a group.
Evaluating Years - 2014 to 2018
My strategy did consistently well during this 5-year run. I managed to beat the average by more than 73 cents every year.
Evaluating Years - 2008 to 2013
I began marketing my farm’s corn in 2008, just after the start of the ethanol mandate. As the chart shows, I did well in my 1st and 2nd year.
However, the drought years of 2010, 2011 and 2012 were rough. Still, between 2008 and 2014, I managed to keep my average 4 cents better than the average farmer price across those six years.
Over Time My Strategy Has Worked Well
For the last 16 years my average price has beat the average farm price during that same time by almost 30 cents on average each year. Clearly, I under-performed during 6 outlier years, but I made up the difference in the remaining 10 years and managed to out-perform the average farm price on any 5-year rolling average.
Being 30 cents per bushel ahead each year on corn is a benefit of over $50 per acre on a 180 bushel per acre yield.
Learning From the Past
I learned a lot during the marketing years of 2010 to 2013, which made me better prepared to handle 2021 to 2024. Since adjusting my strategy following the drought years a decade ago my average price has exceeded the average farm price by over 46 cents on average each year for the past 10 years. That gives me a premium of over $75 per acre on a 180 bushel per acre yield against the average farm price.
Bottomline:
A good risk management strategy helps me to smooth out the peaks and valleys in the ongoing marketing cycles. There is no perfect marketing strategy that will be right every year. For me it’s about finding the one that works the most often and gives me the most base hits with the least strikeouts.
If you would like to learn more about marketing strategies that minimizes risk while maximizing profitability reach out to me at jon@superiorfeed.com.
Programing Note:
I was on US Farm Report this weekend talking about the markets. My segment starts at the 7:50 mark. Click here to watch U.S. Farm Report | 08/31/24 (youtube.com)
Jon Scheve
Superior Feed Ingredients, LLC
9358 Oak Ave
Waconia, MN 55387
Comments