When it comes to selling your grain, do you do the same old thing, year after year, or do you actively incorporate all the most recent information and change your plans to fit the emerging realities of the market place? Turns out, your marketing style might not matter as much for profits as you would think, according to a recent article appearing in the American Journal of Agricultural Economics by Lewis Cunningham and colleagues from Oklahoma State University.
The authors looked at more than 25,000 individual sales of wheat by Oklahoma producers from a 9-year span from 1992 to 2001 and classified individual producers as having either a mechanical style of marketing – selling at the same time every year – or as have an active style where they change things up over time, e.g., sell early some years and store and sell later in other years. They then look at two things: 1) Did the style of selling correlate to average price received? and 2) Did the same sellers do well year after year?
Producers with a mechanical style of selling wheat did no better or worse than those producers who altered their sales timing on a year-by-year basis. Furthermore, there seemed to be very few producers that earned consistently high or low prices (top or bottom 25% of all producers).
What lessons can we learn from this analysis? Well, for Oklahoma wheat farmers, their style of marketing showed no connection to the prices they received and when producers sold for high prices one year, they most likely followed up next year by getting prices that were average or worse. Does it hold for corn and bean farmers and for wheat farmers in other areas of the country as well? Can’t say for sure, but most economists believe in the Efficient Market Hypothesis, or that outguessing the market is difficult to do on a regular basis. However, active market planning and timing may be important to make the most out of government payments, which wasn’t considered by the authors of this one. So, maybe it would be hasty to pitch out that marketing plan just yet.