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Characteristics of a Good Crop Sales Advisor

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A Good Crop Sales Advisor Is Crucial

Having been on the merchandising and price risk management side of the Ag industry for nearly 40 years, there are certain things to demand from your crop sales advisor. Even more important is to demand these things from someone with whom you are considering signing a consulting agreement.

Best Practices of a Good Crop Sales Advisor

I recently chatted with Progressive Farmer journalist Barb Anderson, who wrote an article on the Art of Marketing. She was kind enough to summarize some of my perspectives on the characteristics of a good crop sales advisor, in a short summary at the bottom of her article. I am taking this opportunity to discuss some of those points in greater detail.

Understanding Your Financials

The advisor whom you will trust to develop, monitor and adjust your crop sales plan MUST have a thorough understanding of your financials.

  • Accurate direct and indirect costs
  • Your current crop acreage and conservative yield estimates
  • Individual cash-flow requirements
  • Family living demands
  • Crop-insurance parameters
  • On-farm grain storage
  • Transportation considerations to destination(s)

A good crop sales advisor cannot make specific recommendations that help you protect profitability without this information. If you are not comfortable sharing this level of financial detail with him, I will suggest he or she is not the right advisor for you.

Experience Matters

It is not enough for an analyst to encourage a farmer to “reward a rally” by selling x% of his production without an understanding of how that sale affects that farmer’s bottom line. Your analyst must have at least 5 years of market experience with the crops (or livestock) he is advising you about, as well as experience in both bullish and bearish crop cycles.

No matter how charming, intelligent or likable someone is, there is simply no replacement for experience. Tweet this

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Your advisor must have regional expertise in the cash markets he analyzes for you. Without that expertise, he won’t have a sense of the delivery periods when your local processor or ethanol plant, for example, doesn’t have enough grain coming in, in order to anticipate demand-related spikes in basis.

Or alternatively, without regional expertise, he won’t have a good idea of when to anticipate basis drops so you don’t get stuck selling spot grain during those periods.

Trading Expertise – Fundamental and Technical

Your crop sales advisor must have both fundamental and technical trading expertise. Over the course of a crop year, either aspect can be the primary driver for a market. If there is a technical rally unfolding, for example, your advisor needs the ability to interpret trading charts for you so he can help you develop and execute orders effectively.

Your crop sales advisor must also have access to resources that allow solid peripheral analyses, such as weather, international market impacts, political issues, and currency considerations.

Protecting Your Profitability Should Be The Highest Priority Of Your Crop Sales Advisor

And finally, I believe a good crop sales advisor must embrace the mindset of protecting your profitability first and foremost. After this is done, the advisor can subsequently customize a plan for you to participate in whatever upside may develop, with futures or options instruments appropriate for your situation.

Not everyone should be trading futures. Your advisor needs to understand your own level of risk-tolerance and the money limitations you have available for hedging. Stay away from analysts with a very short-term trading mentality, as the person who benefits from that is primarily the analyst, not you.

Your Relationship Is A Partnership

Remember, your relationship with your advisor is a partnership. He should be non-judgmental regarding market actions you may have previously made. You had good reasons to make those decisions at that time, even if it doesn’t appear so today. Bring those previous transactions into the entirety of the outlook and move on. That being said, no advisor will be absolutely correct every day because no one can see the future.

Your advisor needs to be willing to admit when an action turns out to be wrong, take steps to lessen the financial damage, modify or correct the plan, and move ahead!

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Written By

Diane Hanekamp

Diane Hanekamp

Manager of Strategic Marketing | dhanekamp@familyfarmsgroup.com

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