Six Things That You Should Know About Grain Prices Every YearWritten by Dailyfutures.com
In a few short months, ground will thaw and planting will begin. Along with change in season will come an abundance of market opinions (mostly bullish) about where prices are headed this year. Before you get swept away with all different analyses, there are six things about grain prices that you should keep in mind every year. One: Farming is one of most competitive business environments that you will ever find. There are thousands of producers of various sizes, none of which has any clout when it comes to haggling prices. The grain producer is prime example of a "price-taker" and that fact alone tells us that over long haul, grain prices will spend most of their time near or below costs of production. Two: Thanks to human nature, price cycle for grains is strongly asymmetrical, meaning that prices spend far more time in downtrends than they do in uptrends. When prices are good, producers are eager to expand production and whole ag industry is eager to help them. The rush to produce more is what kills an uptrend. On other hand, when prices are bad, there is no hurry to cut production. Nobody wants to fire workers or auction off equipment until they absolutely have to. Without a government program, there is no incentive to cut back acres. It takes much longer to bring about behavior that ends a downtrend. Three: Like it or not, subsidies that are above cost of production encourage more production, larger grain stockpiles, and longer downtrends. As a good example, look at cocoa market. Cocoa prices have been in a downtrend for 24 years, thanks largely to subsidy policies of Ivory Coast. You should also notice that governments are most likely to abandon those subsidies when prices are at their worst. It's easy to get political support for subsidies when cost is small. It's another matter, when grain prices are in tank and cost of those subsidies becomes expensive.
| | JIM FINUCAN’S BILL COLLECTING Q AND A, Issue 4Written by Jim Finucan
Q) My small business has grown over past year, but with growth I also have more past due accounts. This is first year I’ve had these problems. Am I doing something wrong?Tom S., Boulder, CO Dear Tom: There’s an old saying “If you don’t have accounts receivables - why not?” I don’t know enough about your billing procedures to know if you’re doing anything wrong, but let me start by congratulating you on increased growth of your business in what was for many a very difficult year. Because you are doing more business now you are experiencing associated aches and pains of having more accounts to worry about. Let’s look at some basic structure that lays a good foundation for loss prevention. Do you make your fees clear to client before agreeing to provide your product or service? Some people are uncomfortable doing this and think it is counter-productive. Nonetheless, subjects like price, payment method and other contract terms should be covered up front. Make sure customer understands his obligation to you before you do business with him for first time.
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