A volatile market can make you feel like you don’t know anything about merchandising. Price, basis, and spreads swing around in bigger increments and at different times than usual. Global weather patterns and “will they/won’t they”
politics add a whole extra layer of uncertainty. Stir it all together and you end up with a stew that has you questioning everything you thought you knew.
When the environment is cooking up volatility, what is the recipe for success in merchandising?
FOCUS ON BASICS
The merchandising world is a big place – counteract that by focusing on the things that matter most to your specific business. What are basis and spreads asking you to do right now? What needs to happen for your business to run smoothly with regard to cash flow, grain quality, logistics, margins, and working capital preservation? How can you align the market’s needs with your own? This isn’t about predicting what will happen, it’s about making the most of what is happening right now.
AVOID THE NOISE
We live in an era with the most information and ways to disseminate and consume information in the history of the world. Plenty of good can come from this, but information will overwhelm you if you let it. The more information you take in, the harder it becomes to stay focused and make decisions. Especially when there is no way for you to impact the outcome directly, your time is better spent making decisions than reading about or listening to another news story.
CONTROL THE CONTROLLABLES
There are a great many things outside of your control which makes it vital to control the things that you can.
- Keep your positions hedged closely, and in the proper months.
- Don’t introduce spread risk where it wouldn’t otherwise be.
- Develop relationships with the businesses that buy from you.
- Work hard to serve farmers, but don’t sacrifice your margin to get volume.
- Understand your financials, and protect your balance sheet and working capital.
These simple things can help you navigate any market environment safely.
CLEARLY DEFINE WINNING
Volatility amplifies opportunities for regret. Even if you do well, you will have the chance to regret not doing better. If you pause too long when opportunity arises, you may miss it.
It’s important to remember what game you are playing. Success has never been about selling the high, buying the low, or predicting what a futures market will do. Remind yourself that winning isn’t about being right every time or capturing every penny of every opportunity – it’s about taking care of your team, serving your customers, and being profitable while you do that.
