Date of this Version
This is number five in a series of six NebGuides on Agricultural Options. It discusses how to use the options market effectively to protect us from our own emotions.
An interesting aspect of marketing is psychological. Many people make a mental decision to market grain when a specific price is reached. However, when the market begins to trend upward and hits that imaginary price level, the farmer previously facing low prices is 1) optimistic for even higher prices, and 2) wants to obtain the highest possible price to offset losses incurred during low prices. What generally happens is 1) no action is taken when our mental price is reached, 2) producers ride the market up and 3) when the market breaks, producers are reluctant to sell in a downtrending market because of belief the market will rebound.
One key to successful marketing is to combine psychological make-up (beliefs and feelings) with the reality that a producer will never sell all the grain at the highest price "because we all know it's going higher." However, during a rising market we can or should sell most of our crop during the highest part of the market.