Melvin Brees
Farm Management Specialist
University of Missouri Extension




Decisive Marketing

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April 7, 2000

The Battle of the Bulls and Bears

Wild daily market price swings make it almost seem like a contest between the bulls (expecting higher prices) and the bears (anticipating lower prices). With a "weather premium" in the market, rain in the forecast suggests more production and prices react sharply to the downside making the bulls wrong. Less than expected rainfall quickly reverses the situation, sending prices higher and the bears lose. "Today's price reversal seriously damaged the bulls' (bears') position" or "The breaking of support (resistance) levels strengthens the bears' (bulls') arguments" are typical of daily market summaries referring to who won--the bulls or bears! This day-to-day "contest" between the bulls and bears, in a volatile weather market, makes both fundamental (supply and demand) and technical (price action) market factors hard to interpret.

This battle between the bulls and bears is reflected in the opinions of market analysts and advisors. Some are becoming very bullish. They see strong demand, above average chances for dry weather and a tightening of supplies resulting in significantly higher prices. While they caution about downside risk, their advice tends to be go-slow on sales and keep the upside open. Other analysts are bearish, warning of slower demand and big supplies even if yields are below trend line. While they recognize the possibility for higher prices, they suggest price protection and being prepared to quickly make more sales when prices falter. It is important to understand that both the bullish and bearish analysts recognize that it is easy to be wrong in a weather market. This is a difficult marketing situation, especially for producers faced with both production and marketing decisions that affect the entire year.

There is a market adage that says, "The bulls get something and the bears get something--the hogs get slaughtered!" The message is that the markets may have opportunities for both the bulls and bears, but those that get greedy or fail to recognize changing trends can lose big. In a weather market, trends can change quickly and opportunities evaporate quickly. When your strategy is based on bullish or bearish expectations alone, failure to recognize change or admit that you are wrong can be disaster.

A bullish or bearish price expectation is important to marketing strategies, but it isn't the only thing. Market strategies should also consider business goals, profitability, cash flow needs and maybe even business survivability. In volatile markets, it is essential to recognize when you need the money from sales so that you can avoid "having" to make sales at market lows. Price speculation is a part of marketing, but business decisions also depend upon managing risk to avoid getting "slaughtered" by low prices.

The contest between the bulls and bears never ends. The nature of the markets is that for every winner there is a loser. For most of us, whether the bulls or bears win is less important than having a strategy to mange risk and uncertainty. -- Melvin

University of Missouri ExtensionDecisive Marketing - April 7, 2000 -- Revised: April 20, 2004