We’ve replaced the “Knowledge” section of our website with our “Tools and Tactics” section. We have retained this section as an archive of our Weekly Corn Market Updates for the 2020 Crop Year and original versions of some of our first articles. Updated versions of those articles can be found on our Tools and Tactics page. Future editions of the Weekly Corn Market Update will be stored on their own page.
The Fed Cut and Corn Prices
We hope you find this information interesting and useful. We plan to publish it regularly, so be sure to let us know if you have any questions or comments. We love to talk about marketing and risk management. We're here to help keep farmers in business and farms in the family for generations - education is just one way we can help.
Risk Management vs. Speculation
Quartzite is in the business of measuring and mitigating risk. We're experts in the field, and we find it a more productive use of our time and our customers' time than guessing where markets are going. We're not against speculation - there are times and places for it. However, we see no reason that a producer's business should live and die with rises and falls in the markets. Instead, we want to give our clients the stability to invest in themselves and their businesses. We do our best to take the market out of the equation, and that is risk management.
The Premortem
A premortem is a tool we use in the later stages of developing a risk management plan. A premortem is useful because it forces us to revisit our strategy, and think about what might be missing. By using the concept of a premortem, we are attempting to force hindsight from the future into the present. Imagine we are trying to write the newspaper story about how it all went wrong before it all goes wrong.
Coining Some Terms
Risk management is intimidating. At Quartzite Risk Management LLC (Quartzite), in addition to our role as an advisor, we want to go the extra mile by being an educational resource for our clients. We offer this note in that spirit. The goal of this piece is to use an ordinary coin flip in examples to shed some light on a few of the terms we often use when advising our clients.
Risk Premiums
The concept of risk premiums is a great tool for understanding how financial markets attempt to balance the probabilities of an uncertain future. We can see risk premiums in many markets, from crude oil to corn. Like most aspects of financial markets, risk premiums are fleeting and difficult, if not impossible, to calculate with any confidence. They can, however, provide us with a conceptual model to understand better how and why particular markets display certain tendencies.
The Relationship Between Risk, Reward, Edge, and Risk Management
Risk is the potential for loss. A reward is a potential gain. Because we see risk and reward in many parts of life, we all have an understanding of these concepts and how they are two sides of the same coin.