Many, perhaps most, farmers these days benefit from a wonderful bit of contrarian psychology, especially at this time of year: it’s better to have fewer choices than more choices.
With many farmers’ rotations set, there isn’t much to decide when it comes to what to do with free acres because there really aren’t any.
With seed supplies for desired varieties hard to get, anybody who had acres to play with in the fall probably doesn’t have many or any today.
With field prep and input procurement — things not done off-the-cuff these days — not many people are jumping into and out of crops based on market or long-term weather reports.
Some psychological studies have shown that this situation, of having few choices, is less stressful than having too many.
Going back more than 20 years, a number of studies have found that people tend to be happier when they have a handful of choices to make, rather than dozens and dozens. Having too many choices can lead to overheated brain circuitry, which can lock up and shut down, like a computer with too many open programs.
There’s investing versions of this, which applies to farming, especially this year: dollar cost averaging and asset allocation.
Like farmers sticking to their rotations, those approaches take away some of the excruciating decisions investors have to make if they start with a blank slate and then decide where, out of 10,000 choices, to put their money.
Dollar cost averaging is the practice of investing money in specific investments at a certain pace regardless of prices or other market factors. This can be with individual stocks, mutual funds or almost any publicly traded option. It can be done with dividend-paying stocks that have dividend reinvestment schemes.
The underlying philosophy is that market timing — trying to buy low and sell high — is impossible for most investors to achieve and tends to turn out worse than following a disciplined buying or selling strategy like dollar cost averaging.
It’s better in most cases, the thinking goes, to pick reasonable investments and steadily build up positions over time, regardless of high and low price periods, because what’s high or low can only be known in retrospect.
Asset allocation is what most people do with their pension funds. They put a certain amount of their monthly contributions into this and a bit into that, with the design of the overall portfolio designed to provide a relatively stable return based upon the risk-versus-reward profile of the individual.
Asset allocation also avoids market-timing pitfalls and provides portfolios that avoid much of the volatility that so badly rattles investors in bad times.
For farmers, there are so many decisions to make. Every field has to be managed differently. Long-term production strategies affect machinery choices. Financial results from recent years set some of the parameters for choices in coming years. Life and family decisions affect decisions around investment, management and risk tolerance.
This year, there are big factors that could affect cropping decisions. In many areas, the soils are very dry and the spring weather so far isn’t doing much to alleviate that.
What do the long-range forecasts suggest? Should that affect farmers’ choices on what crops to seed in a few weeks?
The markets are offering attractive prices. Should they be locked in? Should today’s estimated relative profitability affect what a farmer seeds this spring?
Some farmers will feed those weather and market outlook factors into their decision-making machines.
Some low-risk decisions are likely for some, like swapping acres between various sorts of cereal grains.
But for most, the decisions were made months ago and farmers have enough to worry about without trying to figure out the weather forecasts and what markets will be rewarding six months from today.
There’s going to be a lot of worry for farmers this spring. Until there’s enough moisture out there, there’s going to be a lot of faith-based preparations.
Not having a bunch of acreage decisions to make is something that should make the pile of anxiety a bit lighter for many farmers. Most of them won’t even realize what they’re not having to worry about this spring.