Cash is Not the Only Determining Factor

I had a great conversation today with a fellow farmer in Saskatchewan. We talked at length about the significance of the commodity prices hitting the floor boards again. Is the sky falling versus there may be some opportunities for those that do not panic sell. As I have mentioned before these are challenging times that seem where volatility is frequent instead of rare.

One interesting thing that came out of the conversation was that selling based on cash flow requirements is becoming less and less a mantra to live by in all situations. I think in the past farms sold their crop only when they needed cash flow and otherwise just left it sitting in the bin until the bin space was required other wise. And in a lot of cases if your bins were full you just bought more bins (this is no longer available an increase in steel prices and long setup times). Due to the increased volatility of prices you need to take advantage of selling your inventory when the time is right. Many farms missed out out on the last of great prices in July mainly because they did not need the cash flow at the time. This has proved to be a costly mistake for all of us.

Incremental selling is an important strategy while considering all factors and not just cash flow requirements.

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