Don’t Look a Gift Horse in the Mouth

Kurt Wittler

Kurt Wittler

 

My guess is most people have heard the expression “Don’t Look a Gift Horse in the Mouth”, and know what it means. Quite simply a “gift horse” is a horse given as a gift. (I probably didn’t need my fancy Nebraska Wesleyan University degree to figure that out)

A horse’s teeth are regarded as a good guide to its age. When you buy a horse, you check its teeth to see if it matches the age of the horse according to the seller. If someone gave you a horse as a gift, it was considered ungrateful to check its teeth. The advice given in the ‘don’t look…’ proverb is: when receiving a gift be grateful for what it is; don’t imply you wished for more by assessing its value. Simply accept the gift and be thankful.

What does this have to do with grain and why is it in this blog?? My first answer is, if James can talk about champagne, noisemakers and glitter in a blog about 2016 seed guides, I should be able to talk about “gift horses”. The second and real reason, is the volatility we have seen in grain markets over the past month and a half, and the need to focus on “Net Revenue vs. $$/Bushel”.

Since June 16th, the corn market moved 90 cents higher in just four weeks and has now given three-fourths of that back in the last two. Soybeans moved nearly $1.50 higher and has also given back three-fourths of their gain. This volatility certainly brings a lot of “emotion” into selling decisions.DSC_7548

Up until the push higher, the reality for most was that the “cost of production” was going to exceed the market value of their crop. The saving grace for producers in our area was that crops looked fantastic. The probability of more bushels per acre, had break evens inching lower, but still no money to be made.

Here comes our “Gift Horse”. The combination of potential record yields, at least for Northeast Nebraska dryland farmers, and a 90 cent move in corn values and $1.50 push in beans, had “profitable” sale orders that had been sitting for more than six months finally getting filled. Unfortunately, as we were moving higher, “emotion” kicked in, and orders were pulled. As quick as we moved to an area of profit, we have moved back to an area of “cost of production” exceeding grain values.

Focusing on “Net Revenue vs. $$/Bushel” allows you to make profitable sales instead of trying to “guess” the high. How bullish can we afford to be? Same as “Not Looking the Gift Horse in the Mouth”, sometimes we just need to accept the gift and be thankful. Get away from overanalyzing it, and trying to “guess” how old it is in the case of the horse, or how much higher it will go, in the case of grain markets.

By the way, I really enjoy James’s blog.