Friday, October 12, 2007

A Jack-of-no trades

By Kevin Duling

Farmers and ranchers all have unique attitudes. Some are optimistic, some pessimistic, most are a little of each at any given moment. In college, I found the derivation of such attitudes in the agricultural sector very interesting. Just how exactly did we become like this?

After college, I knew it would be important to incorporate the commodity market into our marketing plan to hedge important prices. After a couple successful years of hedging, I grew a bit cocky. A businessman friend of mine asked the question to me, “Why farm when you can make that much money trading commodities?”

With that in mind I proceeded to put as much money as I could into my commodity account. After doing a little homework, the perfect trade appeared. Something about the cash cattle trade from the packing house yadda, yadda, yadda.

In short, by buying August cattle in June, it was a winning trade working over 85 percent of the time, unless corn prices were too high, beef demand was slow, or sunspot activity was higher than normal causing the cattle to become lethargic, thus gaining more weight than anticipated.

My broker informed me if the cash cattle traded at 75, my trade was a guarantee. On that Tuesday, the USDA report showed cash cattle trading at 76! That was one more than we expected! We were going to make a killing!

As the futures market opened, I gleefully made the call to my broker. He said we were up for a bit, but something happened and we were now down the limit. How could that be? It was a guarantee? My stomach sank as I told my broker to get me out of the trade before all of my money was gone. As it turned out, there was an E-coli outbreak in Missouri, which caused the market to drop for one day, then go limit-up the next four.

At this time, crude oil was trading at $11 per barrel and it surely wouldn’t go much lower than that, right? My broker informed me that jumping into a different market right after a big loss is usually not a good sign. “But crude oil is at $11”, I snapped back.

The good news was that $8 crude oil had the farm diesel price at 60 cents per gallon! This was the first sign that I was becoming a true farmer. Optimism in the face of disaster.

The weather is one other subject that gets gently massaged into an agricultural producer’s mind. In college, I was hired by one of the nation’s top elite firefighting crews. The thrill of the job would be great, but I was also guaranteed at least 600 hours of overtime, making my next year in college to surely be a lavish one.

After the wettest summer in Pacific Northwest history, my 18 hours of overtime allowed me the luxury of three new textbooks. I remember stating I would never fight fire again.

Upon graduation, my father informed me there was acreage available and room for me to move home. Banking sounded boring, firefighting was only seasonal, so home we went.

With the winter as our slow time, it was the perfect opportunity for me to purchase a season pass to the local ski resort. There were great savings to be had with all purchases before November 1st. I found solace by telling myself that good ski seasons will often start in January.

As March approached my solace was destroyed by a letter from the ski resort stating there would be no refunds on season passes, but they would give a 10 percent off coupon for all resort merchandise, if the resort opens this year.

As a seasoned professional agricultural producer, I find my attitude to waiver only when it’s too cold, too hot, too wet, too dry, or somewhere in between. On a more positive note, if I get married again someday, I’m going to have an outside wedding in late April. The weather always cooperates in late April.

Kevin Duling is a wheat farmer and freelance writer from Maupin, Ore. His stories will be posted every Friday on the Capital Press blog. Comments are welcomed at kevinddul@aol.com.

Copyright June 2007, Kevin Duling

2 comments:

tim relf said...

yes, some are optimistic and some are pessimistic - but I think they all have to be pretty optimistic at heart to stay in this business!

kd said...

I agree, however, I do have a neighbor who is undoubtedly the most pessimistic farmer on the planet. He's been in business for at least 25 years. He can make ten dollar wheat sound like a disaster.

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