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An oldie but a goodie. This week we revisited a conversation between Jack Cresswell and grain marketing specialist Nick Crundall, CEO of Market Check, on the Farms Advice Podcast. With commodity margins continuing to tighten, it acts as a timely reminder on the need for diversification and risk management. While the discussion centres on the decisions a grain farmer faces, from a personal and investor standpoint there are a lot of parallels and lessons that make it well worth a listen.
What stood out was the psychological side of the discussion where Crundall unpacks how growers constantly find themselves regretful about their selling decisions. Holding on for too long hoping for a better price or selling too early and watching the price run is a trap common for growers trying to speculate. But to Crundall it’s all about how we manage this risk based on the information and tools we have available at the time, citing speculation is not a strategy. A useful reminder to remain process driven and have a strategy in place so that short-term emotion does not dictate long-term outcomes.
Crundall provided a refreshing view on the need to be opportunistic, noting that the opportunities that come are often short lived. If you do not pick up the phone when a buyer is short on a delivery or scrambling to fill a train, you will curse yourself when the grain price moves. The same applies to equity markets – a short-term dislocation in a share price does not stay open for long, and having the process to recognise it and the conviction to act is what separates good outcomes from average ones.
Perhaps the most striking moment is Crundall drawing a direct parallel to hedge fund managers. The best traders in the world, he notes, have just over a 50% success rate on the calls they make – but what they do really well is manage their risk. As soon as they realise they are on a loser, they cut it and let their winners run. Easier said than done but a valuable concept worth striving for, nonetheless.
For a podcast hidden from the finance world, there is a surprising amount to take away – manage your risk, be opportunistic and know when to walk away.
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