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Shutting Off Your Squirrel Brain Before It Drives You Nuts

Flawed thinking can trip up grain marketing. Here’s what to do about it.

When conditions are tough, it’s natural for lower order thinking and survival instincts to kick in—like the brain of a squirrel in survival mode. Economists call these habits “heuristics”—bad habits that take over and sabotage good decision-making.

Our latest podcast aims to help you understand and resist your “squirrel brain.” Doug Roose, V.P. of Producer Marketing at ADM sat down with Nathan Brabec at the Farm Progress Show to talk about the mental battle farmers face. Brabec is an ADM Integration Manager in Nebraska who has studied the issue. Listen here:

Brabec identifies five fallacies that can trip up good grain marketing:

1. Loss avoidance:

The tendency to keep something you’re afraid to lose, versus trying to earn a similar gain. “It’s better not to lose $5 than to find $5,” goes the thinking. But the result is indecisiveness. Even if the grain market is near your goal, loss avoidance can keep you from getting ahead.

2. Confirmation bias:

Seeing only the information you want to believe and dismissing anything contrary. Many farmers brushed off this year’s USDA crop reports and bet on markets continuing to rise. That bias against real supply-and-demand data tended to put them in an over-bullish position.

Believing better markets are due doesn’t change reality or make the most of opportunities today.

Nate Brabec
ADM Integration Manager, Nebraska

3.  Gambler’s fallacy: 

The mistaken belief that if the roulette wheel is black for three spins, the next one has to be red, when the odds are always 50/50. It explains why so many farmers expected a string of tough years to finally let up in 2019. Believing better markets are “due,” though, doesn’t change reality or make the most of opportunities today.

4.  House money: 

It’s easier to bet $20 you find on the street than $20 out of your pocket. Farmers often hang on to their bin bushels and downplay the real dollars that grain could be earning in the market. This reluctance can do real damage to the bottom line.

5.  Regret: 

The pain of a mistake is twice as strong as good feelings from a success. So we put off decisions—and procrastination gets worse when we bear sole responsibility for the results. Farmers who go at it alone in grain marketing are more prone to this trap.

Outsmarting your “squirrel brain” is not a matter of intellect, says Brabec. It takes conscious effort and a set of strong defense mechanisms. Here are some of the weapons he recommends:

Sticks to beat back the “squirrel”:

Ask “What if I’m wrong?” Beware of over-confidence in your opinions about the grain market. Seek out contrary information and be ready for other possibilities. 

Write out a plan: Conduct your grain marketing around your price targets: the sum of production costs, fixed costs, and a margin for income. Don’t move the goal posts. Sell a meaningful share of bushels at your target and if the market goes higher, later sales can add a cushion.  

Get an accountability partner: Share your plan with a business partner, family member, banker, or your ADM representative. We can hold you to your goals and ask questions before you veer off track.

Use automatic contracts: Put a percentage of your bushels in a tool that executes for you automatically. For example, one that earns the average over a better pricing window. This removes some of the emotions in grain marketing. 

Forgive yourself: Just like a shortstop in a baseball game, if you bobble a play, don’t let it turn into two or three errors. Get your eye back on the ball and your head back in the game. 

Know your enemy: Learn to recognize your assumptions. Read Beyond Fear and Greed: Understanding Behavioral Finance and the Psychology of Investing. After all, you’re a grain investor in the market.

Don’t go it alone against your “squirrel brain.” Your ADM representative can provide solid information about the grain markets, a plan to keep you disciplined, and a range of tools to help reach your price targets. Call on us to be your accountability partner.


Contact Your ADM Representative Today

To take some emotion out of your grain marketing, consider our Average Seasonal Price (ASP) contract.

Past performance is not indicative of future results.

ADM is providing this communication for informational purposes, and it is not a solicitation or offer to purchase or sell commodities. The recommendations in this communication do not take into account any particular individual’s or company’s objectives or needs, which should be considered before engaging in any commodity transactions based on these recommendations. The sources for the information and recommendations in this communication are believed to be reliable, but ADM does not warrant or guarantee the accuracy of the information or recommendations. ADM or its affiliates may hold or take positions for their own accounts that are different from the positions recommended in this communication. The information and recommendations in this communication are subject to change without notice.

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