Craft a money-making strategy for 2014 crops
You don’t choose what to plant each year based on a whim. So why market that way? A well-developed and realistic marketing plan will help prepare you for tough and risky decisions, reduce stress and maximize profits. "Farmers should be proactive—not reactive or overactive," explains Ed Usset, an ag economist at the University of Minnesota. "Fear and greed are powerful emotions, and they affect your decisions. A solid plan is the only effective weapon against these emotions."
Be prepared and agile to cash in on good opportunities. "The best marketers are disciplined and flexible," notes Chip Flory, Pro Farmer editorial director and host of daily radio program Market Rally. "Have a marketing plan that allows you to hit your marketing objectives and exposes you to enough risk to take advantage of better pricing opportunities later."
Follow these strategies to "plan your trades and trade your plan," in Usset’s words.
Steps Proactive Producers Should Take:
Document Intentions and Outcomes
While greasing up the combine in a few months, develop a marketing plan and write it down. The plan can be simple, Usset says. List objectives, the number of bushels to sell at harvest, the number of bushels to hold and the date on which you plan to sell held grain.
Also write down when you made a sale and why, Flory adds. "Undoubtedly, you will make some sales too soon or too late, but if you have a record of why you made the sale, it can keep you from kicking yourself later," he says.
Know Production Costs
It’s impossible to set educated revenue-per-acre goals without knowing how much it cost to plant an acre. "Use your actual production costs so you know when you’re locking in a profit," Flory explains.
Be Consistently Average
"Great marketing is not finding the high price," Usset notes. "It’s finding an extra 10¢ to 20¢ per bushel with a solid plan that avoids mistakes."
Whether selling high or buying low, credit luck. "Trying to be absolutely perfect in your marketing endeavors will almost always guarantee failure, and it’s why some potentially high-priced bushels are sold months later for much less," Flory says.
Ignore Market Info Clutter
The 24/7 news cycle makes staying on top of market news daunting and almost unrealistic. "Most of us live by the assumption that if we have more information we can make better decisions," Usset notes. "But it may lead you to a worse decision or no decision."
Gather information and opinions from a manageable number of sources, Flory advises. But always make your own decisions on acceptable prices.
Have an Exit Tactic
Don’t just put grain in the bin and wait for higher prices. "A good exit strategy should have price objectives with a time component," Usset explains. For example, a farmer might commit to selling a certain number of bushels when cash prices reach a set dollar value.
Set Minimum and Maximum Price Objectives After Harvest
"Think big and be realistic," Usset says. "You want the minimum price to be at least 10% higher than the harvest price." Once prices reach that level, be prepared to make sales. On the other hand, if prices take a trip south, the time component of the plan kicks in; this keeps grain moving and makes you an active marketer, not a complacent one.
Hone your skills set with the Pro Farmer Marketing Education Series workbook and DVD. For details, visit www.ShopFarmJournal.com.