How do I know how much milk to sell at any one time? And how many months out?

This question can be challenging to answer, since each operation has its own needs and goals for marketing. Risk tolerance and lender relationships are two important considerations that make marketing goals very unique to each operation.

That said, it’s important for a marketer to sell, ideally in increments and with discipline, enough milk to build the best possible weighted average over time. If you sell in sizable enough percentages, if prices fall you are able to maximize the difference between the bottom of the market and your average weighted price. If prices go up and you’re selling in increments, you minimize the difference between your price and the actual. Generally, marketing decisions are made in 10 percent to 25 percent increments.

It’s really important to keep your eye on your weighted average price. If you do not, you could allow emotions to take over in your decision-making. You might feel really good about a particular price you captured, and as a result become less vigilant in your marketing, only to find later that you did not sell enough at that high price to significantly impact your overall average.

As to how many months to go out, this also depends on operational goals and needs, but when prices are high we are not afraid to look at 12 to 18 months for sales. If prices are in the bottom of a cycle, selling out more than a quarter, or six months, may be all we are willing to do. That’s where fundamental analysis comes in. It helps put current price levels into perspective by analyzing supply and demand factors, price trends and cycles.