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Todd's Take                   12/14 09:29

   An Old-Fashioned Lesson

   What helps one survive bearish times in grain markets? A healthy dose of 
old-fashioned values. 

By Todd Hultman
DTN Lead Analyst

   After many years spent working in and teaching about commodity markets, I 
don't ever recall equating my job to the way a country minister might talk to 
his congregation. Not until recently, that is, after an interesting experience 
at this year's DTN Ag Summit.

   The first time I ever read a commodity-related article that sounded like it 
could have come from a man of the cloth was a few years ago. In October 2014, 
at the height of the bull market in cattle, DTN Livestock Analyst John 
Harrington penned the article, "Cattle Party Rocks On, But With Fewer 


   Harrington described how record cattle prices and profits in the first three 
quarters of 2014 made for a helluva party, but also pointed out that fed cattle 
breakeven prices recently fell below breakeven levels. Harrington's parting 
line to the fictional barkeep was classic: "Just make sure they know, until 
further notice, no one else is buying their drinks." 

   The article was on point, as spot cattle peaked near $172 per cwt that month 
and sank below $100 two years later. Beyond the economic tip, Harrington's 
sober perspective captured the essence of where bull markets go wrong: We get 
drunk on the feeling of good times and often aren't prepared for what follows. 
It was a lesson on temperance as much as it was economics.

   Why was I thinking about that this time of year? Was there something I 
needed to confess before Christmas? 

   No, it wasn't festering internal guilt, but my Tuesday morning breakfast 
with a small group of impressive guys that happened to come to DTN's Ag Summit 
meeting in Chicago.

   As official host of our table, I was supposed to have a conversation 
starter, so I came up with this: As you know, with grain prices in the dumps 
again this year, there are a lot of farmers that won't be taking their families 
on Christmas vacations to Chicago. I know you won't brag, but if you could pick 
out one thing, what have you done differently that has helped you survive all 
these years?

   The first gentleman paused and said (to the best of my flawed recollection), 
"You know, we have always been afraid of taking on too much debt." I assumed 
when he said "we" he was referring to a family operation. "There have been 
years we probably could have expanded more than we have, but we stayed 

   I asked, what kept him from overspending when corn prices were high, like in 
2008? He said, "We sold some corn near the high, but we also sold a lot of corn 
at $4.00 that year." As he spoke, there was no hint of regret, and he added, 
"$4.00 at that time was a good price."      

   As I was thinking about his comments, the second fellow jumped in, "I am a 
fourth-generation farmer in our family, and I always heard from an early age 
that the third generation loses the farm -- I was determined not to be that 
guy." He also mentioned an article he read many years ago, which he kept and 
still reads, offering down-to-earth advice about farming for the long haul.

   The third fellow at the table said he has a background in finance and 
accounting and has always kept close tabs on the numbers. He says it bothers 
him when he talks to farmers that don't know their numbers, and it makes him 
shudder when he hears about big loans that have little chance of working out. 

   At this point, I'm pretty sure my mouth was hanging open as I realized that 
all three men from different parts of the country just answered a spontaneous 
question with the same Midwestern message of temperance and frugality that many 
of us learned growing up, either from an Aesop fable or sitting on a wooden pew 
Sunday morning.

   Don't get me wrong, I am not casting stones at anyone struggling in these 
tough times, and sure, there are many factors that go into whether a particular 
farm makes it or not. Even so, I was fascinated that these three survivors all 
displayed what I would call a healthy respect -- maybe even a tinge of vigilant 
fear -- for the ups and downs of life and consciously chose to stay on the 
cautious side.

   For the record, the fourth and final grower at our table was one of those 
indomitable spirits that comes along once in a blue moon. He was born with so 
much energy and vinegar that you could parachute him into the Amazon rainforest 
and he'd find a way to come out on top. That's a quality that can't be taught, 
and it made for some fun stories.

   Here in the fourth consecutive year of low corn prices and anticipating 
possibly a billion bushels of U.S. ending soybean stocks, it is easier to see 
the value of not getting swept up in the euphoria of good times. The challenge 
is to remember these lessons when the party seems so alluring. For me, 
Harrington's timeless wisdom and the sage advice from a Tuesday morning 
breakfast are the kinds of things we all need to keep tucked in our caps.

   Todd Hultman can be reached at  

   Follow him on Twitter @ToddHultman


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