Risk And
JOHN BERRY
Penn State Extension
Lehigh County agent
Risk can not be separated from
fanning without removing the
opportunities for profit.
Agricultural prices will be
more volatile over the next 5
years than in the past 5 years.
Volatility means sudden and dra
matic shifts in prices. These shifts
can be a source of gain or loss,
depending on your marketing
strategy.
The 1995 "freedom to farm"
bill encourages fully planted acre
age which can result in record har
vests. The exit of the federal gov
ernment from the grain storage
function as a market price stabi
lizer is at hand. The current melt
down in Asian markets impacts
our largest agriculture buyers of
grain and pork;
Additionally, the US is no
longer the sole world supplier of
farm products. Australia, Argen
tina and Europe significantly af
fect the wheat supply. Brazil,
China and India are major soybean
competitors. China and South Af
rica are exporting more and more
corn. Australia and Argentina con
tinue to build their beef exporting
capacity.
Current market factors
Consider the magnitude of the
Asian market setback in the past
twelve months. Morgan Stanley
reports the following declines: Ja
pan, 25%; Singapore, 25%; Hong
Kong, 27%; Philippines, 55%;
South Korea, 59%; Indonesia,
60%; Malaysia, 68%; Thailand,
75%.
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A level of stabilization has
not been achieved yet. 25% of the
US export market faces slow
downs because of the rise in the
value of the dollar. Our exports'
cost per unit are rising. Cheap
imports will depress prices and
lower profits in sectors that com
pete with Asian industries.
The current USDA sup
ply/demand report is bearish for
com and wheat, and neutral for
beans. They forecast more cany
out com and increased world wheat
supply.
Beans did not change from the
previous report. There was in
creased plantings of early season
beans in South America. These
soybeans will come to market dur
ing the end of April. As the South
American's try to capture prehar
vest premiums, US bean prices
could be pressured earlier than
normal this spring.
The world market works both
ways. The weakened condition of
several oil consuming economies
could present favorable opportuni
ties to forward price energy needs.
Lower input cost for fuel and heat
would help offset reduced revenue
from exports.
Avoiding the crush
As we talk with our account
ants about year end bookkeeping
it is a good time to consider the
sources of risk in our enterprises.
"Maintaining liquidity or cash
flow should be the primary objec
tive" says Leroy Louwagie of Pro
fessional Marketing Associates.
Consider your ability to meet cash
flow needs in an orderly fashion as
you review your operation and
ms on
ALL VERMONT
CASTINGS
STOVES NOW
ON SALE
Through March 2,
1998 with this ad
time to update your marketing
plan. Gathering market informa
tion is the base of a successful ef
fort. Several sources are available.
Subscription services, the in
ternet, magazines and trade papers
all offer detailed information. "The
use of enterprise accounting and
tlnancial analysis can point to ar
eas in an enterprise that are not
adding to the bottom line.", states
Dennis Ginder, Lancaster County
Farm Management Agent.
What do you want to protect in
your business? Variable cost of
production, total cost of produc
tion, normal profits or unusual
profits are possible goals. One of
the most important considerations
of a marketing plan is your own
comfort level.
Based on your production his
tory, decide what percentage of
expected production you feel com
fortable in pricing at various
stages of growth. Be sure to in
clude your personality in the cal
culations. There are no strict for
mulas for when a particular per
cent of production should be
priced. If pricing 50% of expected
production in April causes ulcers,
but you can sleep having 20%
priced in April, it is obvious
which strategy should be consid
ered.
There are 5 natural breaks
where expected production could
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your debt position.
Another consideration is, does
your operation have "depth"? Are
others being groomed by sharing
in management decisions? Re
member your operation has been
designed to fit your management
style. The lack of next generation
management experience can force
farm liquidation at distress sale
prices.
The winter months are an ideal
Your brain is the best
fertilizer
be priced. Prior to planting, im
mediately following planting, 3
months from harvest, 2 months
from harvest and 1 month from
harvest.
After you have determined
your comfort level for any of
these stages, calculate the price
you feel is needed. Write down
these entry points. Based on your
analysis of the fundamentals in
the market decide where you will
lock in a price for the expected
Ayrshire Consignments
BOONVILLE, NY - The New
York Ayshire Club will be spon
soring its 30th annual Empire
State Spring Sale on May 2.
Consignments are now need
ed for this sale of purebred
Ayshire cattle. Anyone wishing
to consign should send registra
tion papers and, or pedigree
sheets to United Ag Services 12
N. Park Street, Seneca Falls,
NY 13148 Fax (315) 568-2752.
Sought are animals of all
ages especially show quality cat
tle.
This sale has a history of
being an excellent market for
both buyers and sellers alike. In
order to allow for timely print
ing of the catalogue, consign-
E - By Special Request
SALE PROGRAM IS EXTENDED
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Financing Available
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ZARTMAN FARMS
820 Hilltop Road • Ephrata, PA 17522 • Phone (717) 733-1050
Lancaster Farming, Saturday, February 21, 1998-A4l
production. These entry points are
a "trigger" for executing forward
pricing opportunities.
Now that your marketing plan
is complete and written, give a
copy to your banker and your bro
ker. The banker needs to be aware
of possible margin calls in your
hedging account. Now that you
have a locked in price for your
crop you can lobby for a more fa
vorable interest rate also. The
broker will be able to alert you to
Needed
ments should be in by March 10.
The sale will be managed by
Mark Kent of Sennett Sales Inc.
and held at the fairgrounds in
Cobleskill, N.Y. on May 2 at
noon.
Any one having any ques
tions may contact any of the fol
lowing sale committee members;
Jim Patsos Jr. (315) 568-2470;
Carl Poland, (518) 872-2747;
Jack Bell, (315) 287-1219; Mike
Russell (518) 846-7420; or
Charles Cerosaletti, (607) 287-
5325.
The club will also be looking
for consignments for its Fall
Production Sale, scheduled for
Oct. 3 at the same site.
Features corrugated under surface to provide
added softness and easy washing in place
Proven cow acceptance
Durable construction
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Size 48"x66"x2"
48"x72’’x2”
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