With grain margins tight, farmers can no longer afford to market by chance. No matter how you manage your grain marketing or the risk management products you use, there are some things you need to know!
Markets are now driven by machines…
The days of subjective decision making when it comes to market timing are numbered. Recent studies suggest discretionary traders or those who rely on forecasts or fundamental analysis, now account for only 10% of exchange volume. Similarly, data from BarclayHedge, a leading tracker of commodity trading advisors confirms, nearly 90% of the $355 billion managed by commodity money managers is driven by “systematic” models. In other words, the pro’s don’t guess when to make trading decisions and neither should you.
What happened to the analysts and experts?
Investment management and proprietary trading firms discovered the power and predictability of systematic trading years ago. Not only does it eliminate emotion, anxiety, and uncertainty, they found that with a scientific approach, they could minimize risk and maximize profitability. In the highly competitive world of money management, it was adapt or die. Today, all but a very few make decisions on a discretionary basis. In fact, “algorithmic trading” now dominates nearly every facet of proprietary trading, exchange based investing and commodity risk management. As a result, the market analysts and experts have been replaced by computers, coders, and quants.
How’s this impacting grain marketing?
When computers drive trading decisions, the window of opportunity to react becomes smaller. Countless numbers of algorithms drive the markets today but they all look at virtually the same data. Simultaneously monitoring and calculating the most efficient points to buy and sell, they often identify the same trigger levels. Once a trigger is identified, your time to act before the opportunity is lost is fleeting. Conversely, producers with a systematic strategy in their corner can act while others are still pouring over lagging fundamental data.
“Intelligence is the ability to adapt to change”
Producers should adopt a dual analysis strategy!
Are we advocating throwing out traditional fundamental analysis? To the contrary, fundamental market analysis should be guiding your longer term decision processes. Purchasing or leasing more land, buying new equipment or warehousing, as well as planting or crop rotation decisions are just a few of the items where longer term fundamental analysis should play a guiding role. But fundamental analysis is not well suited for market timing. Markets often move well before the fundamental reasons are known or before a producer can act on new information. Producers need a systematic model to reinforce their longer term marketing plans. Fundamental analysis may correctly tell you the longer term forecast is for higher prices, but they won’t tell you when those prices may have peaked until well after the fact. Producer must employ both to optimize their marketing efficiency.
Can a producer gain access to systematic timing model?
Absolutely, and we’ve made it flexible and affordable! I created ABSR following a career in managed futures and proprietary trading. I’ve spent years researching, modeling, back-testing and executing systematic programs. Leveraging this deep background and understanding and applying it to agriculture marketing we developed a system that identifies key market highs and lows in a given marketing year. We employ the same techniques as the largest trading advisors and pass the results on to you.
Don’t confuse technical analysis with a systematic model. A true “system” is rules based, back-tested, and provides specific and quantifiable action levels and allocations, not general price references or obscure allocation levels.
For example, when our model tells us it’s time to act, we send you a text alert containing a confidence level, maximum allocation rate and exact entry price. No vague quantities, entry prices or ambiguous timing that keep you wondering. We eliminate the guess work so you have the confidence to act knowing the odds are in your favor. This is next generation precision grain marketing.
Your’e still in control…