Dollar cost averaging—selling commodities in increments from spring through early winter— could be the best strategy for marketing Texas wheat, says an Oklahoma State University Extension marketing specialist.
“Don’t put all your eggs in one basket,” recommends Kim Anderson.
Anderson, speaking at the recent Big Country Wheat Conference in Abilene, Texas, said he recommends selling the crops by thirds—one third at harvest, one-third in September or October and the final third in November or December. “But sell it all before Jan. 1.”
For the past four or five years, Texas wheat producers may have been better off selling at harvest. “But because of the price variability we have now, the fact that we are in a global market and that we are now importing some wheat, a dollar cost averaging strategy is what I recommend. Don’t sell all your wheat or cattle at one time.”
Anderson said storing wheat is often the wrong strategy, sometimes resulting in high storage costs that eat into price increases.
Corn and drought are the “driving force” behind recent wheat market improvements. “The market is concentrating on wheat stocks and a tight corn supply,” he said. “The market will follow what corn does in the next few weeks, possibly for the next month or month-and-a-half. Then it will watch what happens with establishment of the 2013 wheat crop.”
Anderson said farmers succeed by “making decisions that are normally right and avoiding decisions that are normally wrong.”
That should apply to marketing as well.
Overall, he said, wheat farmers do a good job marketing their crops and typically beat marketing consulting services.
He recommends that farmers devise a plan to market their wheat. “Write it down and have the discipline to follow it,” he said. “Sell after April and before Jan. 1.”
“Marketing is simple,” he said. “Make decisions on what let’s you sleep at night.”