A34—Lancaster Farming, Saturday, September 29,1984
NEWARK, Del. - With all the
confusion concerning the gram
market outlook these days, far
mers are having a tough time
arriving at a practical sales
strategy. Most growers are fairly
dependent on price forecasts in
setting their price objectives, says
University of Delaware extension
marketing specialist Carl German.
Basically, farmers have two
types of forecasts to go on
distant futures contract prices, or
the predictions derived from
sophisticated econometric models.
These models consist of a set of
mathematical equations designed
to account for the variability in
UNIVERSITY PARK - The
Pennsylvania Dairy Herd Im
provement Association (DHIA) is
averaging a turnaround rate of 4.0
days, reports Phil Dukas, Penn
sylvania DHIA general manager.
This figure represents the average
between the date a sample is
collected and the time the
processed management package is
in the mail on its way back to one of
the 6,200 participating dairy far
mers.
“Our members are telling us
that economics are forcing them to
put DHI to use more quickly,” says
Dukas. “Six days, the previous
average, was too long a delay for
their culling decisions, feed
changes and cattle sales. At four
Sire Power plans Md. open house
FREDERICK, Md. - The
Maryland Sales Division of Sire
Power will hold its annual Open
House on Thursday, Oct. 11, from
10 a.m. to 3 p.m. at the Maryland
headquarters near Frederick.
Highlighting the afternoon
program will be Karl K. Kettering,
motivational speaker.
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Making grain maketing decision is complex
conditions affecting price.
Which method is likely to be a
more reliable indicator of price
trends 7
A study by University of
California economists Just and
Rausser, published in 1981 in the
American Journal of Agricultural
Economics, sheds some light on
the question. When they compared
the two forecasting methods, they
found no overwhelming evidence
in favor of either. However, says
German, they did find that in
general futures market prices are
surprisingly accurate indicators,
when compared with econometric
forecasts.
4-day interval in DHIA
days we are nearing the limit for
our current structure, but our
members feel even this turnaround
rate may not be acceptable for
long.”
The Pennsylvania DHIA’s
current turnaround tune is the
lowest in the nation. “Without an
effective network of supervisors,
staff, and Extension agents, we
could not achieve anything nearly
as efficient,” Dukas says.
When asked what DHI will do to
further deduct the turnaround
rate, Dukas replied, “We are
working to improve supervisor
quality and to decrease the
reporting errors that cause delays.
The next major step will be
electronic data transmission from
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Working for people who work the land
In addition, General Manager,
DuWayne A. Kutz, will review the
past year’s business and bring
members up to date on Sire Power
Programs and Services.
Tickets are available from the
Maryland office, personnel, and at
the door.
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Neither system is necessarily to
blame for the errors involved in
price forecasting, the specialist
says. Forecasts often are swayed
by external factors not easily
accounted for.
Since there’s considerable room
for error in any price forecasting
sales strategy, how can farmers
pick a reasonable and profitable
approach to marketing their
crops?
About eight different approaches
are currently in use. Which method
or combination of methods
growers choose depends mi the
degree of risk they’re willing or
the farm and an increase in the
number of computer runs each
day.”
Since 1982 Pennsylvania DHIA
has made changes to improve
quality and efficiency, including a
new data entry facility, electronic
editing of reports and labor saving
lab techniques. “In October we will
be announcing a new system to
automatically transfer cows
between herds,” says Dukas.
“This will improve accuracy and
may knock another tenth of a day
off turnaround.”
■
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able to accept. This is how German
describes each system:
—Fair Weather/Foul Weather
Approach. “Essentially,” he says,
“this boils down to the attithde: if
it feels good, sell a little; if it feels
bad, sell a lot.”
—Cash Flow Approach. “This
method involves a lot of
guesswork,” German says. “In the
past, many farmers have stopped
using any strategy at all after
attempting this approach. The
advent of the micro-computer may
help make it more accurate. ’ ’
—What’s The-Market-Going-To-
Do Approach (Price Forecast).
This is probably the most widely
accept approach to marketing, the
economist says. When used by
itself, it is probably the riskiest.
—Milk Check Approach. “The
philosophy behind this one is, if you
need money, make a sale. This is
0.K.,” German says, “if you’re
milking cows. Otherwise, it’s no
fun.”
—Balance Risk In Conjunction
With Market Planning. “This
approach starts to make sense,”
he says. “Again, the advent of the
computer should help make it
more manageable. ’ ’
—Consider-The-Odds Approach.
Price probabilities are difficult to
quantify, the economist warns.
—Consider-Everythmg Ap
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proach. This method uses
econometric modeling. It is
thorough, but requires a good
model and good data.
—Cost Plus Approach. Essen
tially, know your cost and sell
when the market is above cost
“This method is subject to error
due to yield variability,” German
says “but historical yield data for
a given farm or area will provide
sufficient base for deriving
estimates.”
At present he recommends
farmers use this cost plus ap
proach, using a combination of
price forecasts andd risk analysis
to plan commodity sales.
“In the case of grains,” German
says, “you have about two years in
which to market a crop. Ex
perience suggests that the
marketer who begins his sales
strategy a year ahead of harvest
profits more than the one who
starts planning sales at harvest.
This is primarily because
marketing in advance of a crop
gives you more time to take ad
vantage of profitable pricing op
portunities.”
Timing is the most important
point to consider when marketing
farm commodities, the specialist
concludes. Proper timing of sales
can make the difference between
profit and loss.
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