Marketing matters in globalized ag economy
FARGO -- Farmers never used to have to worry about wheat prices in Russia or Ukraine. "We were worried about what was happening in our backyards," said Paul J. Georgy of Allendale, an Illinois-based futures trading brokerage and agricultural econ...
FARGO -- Farmers never used to have to worry about wheat prices in Russia or Ukraine.
"We were worried about what was happening in our backyards," said Paul J. Georgy of Allendale, an Illinois-based futures trading brokerage and agricultural economic research firm.
Now farmers have to think globally when it comes to marketing their products.
National experts in ag economics were in Fargo recently to talk about the impacts of today's economy on agriculture.
The globalization of agriculture is huge, Georgy said.
"The bigger part of our production is marketed around the world," he said. "Exports have a tremendous impact on the bottom line. That's why we have to be so aware of these other factors like what is the U.S. dollar doing, how is that relationship to other currency, what is our price compared to the price of grain in Argentina or Russia."
Barry Asmus, a senior economist with the National Center for Policy Analysis, said it's an interesting time for North Dakota.
"One is soybeans are so very, very important, but the price is not too good for soybeans. That's kind of problem number one," he said. "Problem two, North Dakota is a big oil state and shale has just gone cattywampus, upside down and there's carnage in shale oil."
Despite that carnage, Asmus said, "there's a pot at the end of the rainbow."
"The days of the Mideast having us by the throat and doing a chokehold are over," he said. "It's the end of the line for them determining oil prices."
Asmus also talked about how increasing wealth around the world could mean more opportunities for U.S. farmers.
"The poor people of this world don't need a sweater. They need a sewing machine," he said. "They don't need aid, they need trade. Helping people to become helpless is not an act of kindness."
Scott Gauslow, a North Dakota Soybean Council director who farms corn and soybeans near Colfax, said in other countries, increased wealth is often spent on higher-quality food.
"Everything's global," Gauslow said. "Everything's tied together and what happens in these Third World countries does affect us."
That's part of why farmers need to act when it comes to marketing their crops, Georgy said.
"There's opportunities out there right now and they need to use those opportunities to protect their risk," he said. "Everybody at the moment thinks prices are going to go higher. That's great if it goes higher, but what if it goes lower? What we've got to be protecting against is the downside, not the upside."
There are ways to use futures and options to take the risk out of their everyday business, Georgy said.
"They're hoping that their crop continues to go up so they can make a living and make money, yet it may not go up so they're nervous," he said. "They've got to make some very big decisions at this time of year. Do they put the crop in, what crop do they put in, are they going to make a profit on it?"
Knowledge of marketing strategy is needed more now that it was years ago, Georgy said.
"Marketing is not a situation anymore where we can just grow the crop and sell it when we harvest it," he said. "You've got to be able to sell it throughout the year. You want to sell it at the highs, not at the lows. Farmers in the last several years have been very good at marketing the crop, selling it through the highs, so let's hope that they can do it again this year."
Bart Schott, who farms corn, soybeans and barley near Kulm, agrees that figuring out a marketing strategy is important.
"It hits most of us pretty hard because most of us have that attitude that the market has to go up," he said. "I think having a plan intact and something that's not so far-reaching was really good advice."