How Do FBN℠ Analysts Develop Market Views? A Quick Q&A with Kevin McNew
Kevin McNew, Chief Economist at Farmers Business Network℠, oversees a team of analysts who use data-driven insights to develop market views that help farmers make informed crop marketing decisions.
Brian Paff: What are the experiences that you've had in your professional life and values that led you to your current role with FBN?
Kevin McNew: I grew up on a farm, and so I knew what it meant to try and make decisions around marketing your grain. I saw my father struggle with that. He was a great farmer, but the business aspect of marketing grain and knowing when to sell was such a struggle—as it is for any farmer because it's so emotional.
And so for me, 25 or 30 years removed from the farm, I’ve been on a quest to really try and figure out how to demystify markets, how to make it simpler, how to make concrete decisions that are useful for farmers. I'm fortunate to have been working with FBN for three years now, and I feel like I’m on the right side of the coin, if you will, of working on behalf of farmers to help solve the marketing riddle.
BP: Obviously data is part of that equation in terms of taking emotion out of the process. How does our team of analysts use data to develop market views?
KM: Data—and using that data wisely—is central to what we do in crop marketing at FBN. We don't want to make decisions that are based on emotion or gut reaction. Instead we want to look at the data historically and the type of environment we're in, and then ask, “What do we tend to see in terms of price action?” And this has many, many broader applications.
Take a look at crop yield forecasting, for example. Last season, a lot of people went into August and saw the USDA's critical report around crop yield. They were thinking that the crop yield was going to be quite a bit lower because of poor spring planting conditions. Well, our objective approach to looking at all of the historical data—not only weather, planting progress and crop conditions but also satellite imagery—showed that the crop yield was not as bad as people feared. Many farmers at the time were convinced national yield was going to be horrible and the market was going to skyrocket, when in fact it didn't. So that's one example how we're taking data and trying to make an objective, unemotional decision around it.
BP: You touched on this already, but why is it important to have a systematic plan in place for marketing grain? How does our Market Advisory program help farmers achieve that?
KM: I remind farmers that if everyone had a perfect crystal ball, you'd make one crop marketing decision a year. You would know exactly when the market high is, and you’d just sell your entire crop. But no one has that perfect foresight, so we have to systematically try and pick the times we want to sell our crop.
We've developed our HedgeCommand tool to help Market Advisory members follow a roadmap, if you will, or a trajectory for crop marketing. You can think about this as systematically selling grain. And there are certain times of the year when you want to systematically sell grain based on history. But things will change, you know—markets move around, conditions change—and so we're constantly updating and adjusting that game plan throughout the season as factors take shape.
With HedgeCommand, you can apply FBN analysts’
market view or your own bullish or bearish view.
BP: What role do your team of analysts as well as the farm marketing advisors (FMAs) play in terms of helping farmers make choices about when to sell and how much to sell?
KM: Our group of analysts are constantly sifting through market data and looking at indicators for where we think the price is going to move. We're covering a wide swath of commodities—corn, soybeans, five different classes of wheat, canola in Canada and a lot of other specialty crops there—looking for the key elements of what we think is going to drive prices going forward.
And then we translate that into actionable decisions for our producers. We're working constantly with the FMAs at FBN to help them operationalize those decisions. What we’re trying to do here again is provide that objective approach to looking at things. So when we see the market deviate from what we think is the right course or we think it's too high or too low, then we work with the FMAs who in turn work with farmers to take action.
You can take a more systematic approach to marketing
HedgeCommand, available to FBN Market Advisory members inside the FBN app, allows you to track and manage your percent hedged.
With HedgeCommand, we’ve created a methodology, framework and technology to help you understand how hedged you are given your underlying crop economics and everything you've done to manage price risk. This helps you leave some of the emotion at the door when making grain marketing decisions.
Conversation edited for clarity and brevity.
FBN Market Advisory services are offered by FBN BR LLC, dba FBN Brokerage and FBN Advisory NFA ID: 0508695
DISCLAIMER: The risk of trading futures and options can be substantial and may not be suitable for all investors. All information, publications, and reports, including this specific material, used and distributed by FBN BR LLC shall be construed as a solicitation. FBN BR LLC does not distribute research reports, employ research analysts, or maintain a research department as defined in CFTC Regulation 1.71. This material contains information obtained from sources believed to be reliable, but its accuracy is not guaranteed by FBN BR LLC. Past performance is not necessarily indicative of future results. For the purposes of quality assurance and compliance, phone calls to and from FBN BR LLC may be recorded.
HYPOTHETICAL PERFORMANCE RESULTS HAVE MANY INHERENT LIMITATIONS, SOME OF WHICH ARE DESCRIBED BELOW. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN. IN FACT, THERE ARE FREQUENTLY SHARP DIFFERENCES BETWEEN HYPOTHETICAL PERFORMANCE RESULTS AND THE ACTUAL RESULTS SUBSEQUENTLY ACHIEVED BY ANY PARTICULAR TRADING PROGRAM.
ONE OF THE LIMITATIONS OF HYPOTHETICAL PERFORMANCE RESULTS IS THAT THEY ARE GENERALLY PREPARED WITH THE BENEFIT OF HINDSIGHT. IN ADDITION, HYPOTHETICAL TRADING DOES NOT INVOLVE FINANCIAL RISK, AND NO HYPOTHETICAL TRADING RECORD CAN COMPLETELY ACCOUNT FOR THE IMPACT OF FINANCIAL RISK IN ACTUAL TRADING. FOR EXAMPLE, THE ABILITY TO WITHSTAND LOSSES OR ADHERE TO A PARTICULAR TRADING PROGRAM IN SPITE OF TRADING LOSSES ARE MATERIAL POINTS WHICH CAN ALSO ADVERSELY AFFECT ACTUAL TRADING RESULTS. THERE ARE NUMEROUS OTHER FACTORS RELATED TO THE MARKETS IN GENERAL OR TO THE IMPLEMENTATION OF ANY SPECIFIC TRADING PROGRAM WHICH CANNOT BE FULLY ACCOUNTED FOR IN THE PREPARATION OF HYPOTHETICAL PERFORMANCE RESULTS AND ALL OF WHICH CAN ADVERSELY AFFECT ACTUAL TRADING RESULTS.
FBN Crop Marketing is offered by FBN CM LLC and is only available where FBN CM LLC is licensed. We do not guarantee customers will receive specific benefits or value from participating in FBN Crop Marketing; results will vary. FBN Crop Marketing offerings involve risks, including the risk that market conditions deteriorate, resulting in contract participants receiving a lower price for their grain than had they not participated.
Nature and scope of services is dependent on information provided by you, our customer, and may vary as a result. We may change any or all of the services from time to time upon notice to you.
Copyright © 2014-2020 Farmer's Business Network, Inc. All rights Reserved. The sprout logo, "Farmers Business Network", "FBN", and "Farmers First" are registered service marks of Farmer's Business Network, Inc. All other trademarks are the property of their respective owners