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Northwest Iowa | So I am going to be the opposite of most that have commented or will on this topic. We use accumulators on every crop. A couple things that need to be placed in front of people before starting or engaging in an accumulator contract. If you don't understand them DONT get in involved, hands down. I can say that about every way to market grain, if you don't understand something do not get involved in it. Now I will say this my knowledge of understanding puts and calls resulted in from me putting $1,000 down and buying one contract when I started farming to get my feet wet and have a dog in the fight. The only way to truely learn something is put your money on the line. So if you want to understand them, positives and negatives put some bushels into an accumulator, you will learn them real fast.
The article you linked is 100% accurate their is so many different ways to administer an accumulator in the form of knockouts, double ups, etc. People dont realize their are accumulators with weekly double ups, double ups at the end, NO double up's, change the start date, change when they stop pricing, etc, etc. They can be written to whatever risk level a producer is willing to take or accept.
Accumulators have been the WORST thing to have the last 3 years of tools in the toolbox to market grain. Just been how it has worked. From 2015 to 2019 they were arguably some of our better sales. The GBS guys right now are behind the 8 ball because of how the markets have been since harvest. My point being EVERY way of marketing can work and not work. Its all about your marketing plan. We use accumulators on a small percentage of crop, knowing that if we double we are still sitting on an abundance of unsold % of production. You DO NOT commit large percentage of bushels to accumulators. Its very risky like you and others have alluded to on the double up features. A producer has to understand the risks of it and if you dont this is where people "get hosed or screwed" in their mind.
Just to allude on how we use them and have had success. We will start them 1 to 2 years away from the crop that will be delivered. We do the weekly double up option which every week we are between the prices and not above we don't double. We than know we cant sell a 200% of the initial committed bushels on those bushels. By working them so far out you, generally, don't get 200% doubled up on. But understand the risk and theirs always the chance you could deliver 200%.
Local coop has worked with these to get guys pricing something as most guys don't look beyond a short window in front of them on pricing grain. I personally think more money has been lost by not pricing grain ahead versus getting double upped on bushels, just my 2 cents and I'm sure people will debate that. Some our forward sellers and some dont sell anything its everybody's prerogative.
Moral of story, in my opinion every way of marketing grain can be good or bad, every way. At time of delivery it is either going to be viewed as I should have sold more at that price or shouldnt have sold a dang thing at that price!! Its all a part of what plan you have put together. What is a persons plan, how do they execute it, and what tools are there to assist in how I want to do it.
Hope I have made sense and appreciate the feedback or questions. Will try to look back today and answer questions or comments as the day progresses.
FYI anybody looking for a good watch this afternoon watch the womens national title game this afternoon. Been a wild and fun ride watching the Hawkeye women and Caitlin Clark on their quest
Edited by Sheep Farmer 4/7/2024 08:21
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Accumulators - A Rant
