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July 2009 Archive for Marketing Strategy

RSS By: Scott Stewart, AgWeb.com

Marketing Strategy

Still Holding Out? Woulda, Coulda, Shoulda

Jul 23, 2009
As I visited with producers at Purdue’s Top Farmer Crop Workshop this week, it became even more clear to me how much '08 and '09 crop producers have left to price.
 
The conversations went something like this: “Woulda, coulda, shoulda…”
 
As prices began dropping in early '09, producers didn’t want to sell on the way down, so they didn’t sell. Then prices fell some more, and many didn’t sell because prices might go back up. Now they don’t want to sell because prices are even lower and they feel like they missed the boat.
 
It’s utter paralysis.
 
Why all the hesitation to get the crop sold? In my opinion, it’s lack of discipline.
 
Top Producer’s survey of its readers (Mortal Sins of Marketing, December 08) is very telling:
  • 61.6% of respondents get caught up in the excitement of a rally and don’t price
  • 73% of respondents said when prices are falling they don’t price because they hope prices will rise
That’s consistent with our surveys of well over 1,000 producers at workshops. Two thirds of those producers surveyed say they know when to pull the trigger, yet they do not execute and get it done.
 
What about you? If you have significant crop left at this time of year with a good crop in the ground, you know that it is more likely that prices will fall some more before they go back up. That’s seaonality. If you’re holding on to crop now, it’s generally wiser to sell now, take what you can, and buy some back if prices rally after harvest.
 
Again, developing your set of strategies and the discipline to act helps prevent the “woulda coulda shouldas.” No matter how much money, time or knowledge a person has, marketing falls apart if there is no discipline. You need to have the discipline to develop your strategy, track the indicators that you are using, and implement your strategies when the signals are hit.
 
DOES THIS EXAMPLE SOUND FAMILIAR? You have a trigger point you decided on many months before and reaffirmed many times over. When that signal is hit, however, you don’t follow through because there is some market news that sounds just too tempting. You hear that China may buy and you think, “I’ll just wait a day.” When China doesn’t buy, the market falls apart, and you regret your decision to wait. Now the price is too low, so you wait and hope it bounces back. But then it declines some more, and then more, and then more. In the end, despite a very well thought out plan and strategy, you never pulled the trigger to make the sale. The best strategy is worthless without discipline.
 
For some readers, it may sound as if I repeat this mantra over and over again. It’s worth repeating, because producers by their own admission struggle with paralysis over and over again. I’m here as an objective analyst of price patterns and producer behavior over the year, and I firmly believe that emotion needs to be removed from the process. Develop the discipline to get the sales made.
 
Scott Stewart is president and CEO of Stewart-Peterson, a commodity marketing education and advisory firm based in West Bend, Wis. You may reach Scott at 800-334-9779 or email him at scotts@stewart-peterson.com.

You Gotta Believe It's Worth the Effort

Jul 15, 2009
A reader of my last blog post about USDA reports commented on how unpredictable the markets are. EXACTLY! Unless you can accurately predict the weather, or what the government is going to do or say, you will never be able to predict prices. And if you try to predict, and you’re wrong, you spend your time feeling frustrated and wrong.
 
I talked to a producer just this week who quipped, “Marketing isn’t fun because you are never right. Unless you hit the top every time, there are always regrets.”
 
All this emotion leads producers to believe that marketing simply cannot be done well. It’s a no-win situation… You are beat up by everyone and everything… You have no control. When I speak at Purdue University next Monday, I plan to help dispel these myths and help listeners start believing that marketing can be done well.

The first step in accomplishing a task is to believe that it can be accomplished.
 
Experience has not been kind to many producers. They’ve tried cash marketing, fundamental analysis, technical analysis, futures, options, average pricing programs at the elevator; they have tried it all. Yet year-in and year-out, they are still dissatisfied with marketing. (At our workshops, 91 percent of producers we survey find marketing stressful.) What they learn is that no amount of experience and no number of commodity advisors they try ever seems to make enough difference in their bottom line to make it worth the bother.
 
Part of the reason for such failure is the faulty premise that it takes a good and accurate market outlook to do marketing well. As I’ve said before, marketing based on outlook is guesswork. So change your approach! Why not? You’ve tried everything else! Try this approach instead:
 
  • Develop a strategic approach to the market vs. an outlook-based approach
  • Develop the discipline to act according to your strategy
  • Allow your strategy to remove the emotion from your marketing process

To become a good marketer, or to work effectively with a professional marketing advisor, you have to start with the belief that marketing can be done well, and that there is substantial reward for doing it well.
For many producers, past experience would not support this belief. Yet it is not a misplaced belief, and it is one that is absolutely necessary to the survival and the prosperity of farms across the country.

May you be one of the prosperous believers!

Scott Stewart is president and CEO of Stewart-Peterson, a commodity marketing education and advisory firm based in West Bend, Wis. You may reach Scott at 800-334-9779 or email him at scotts@stewart-peterson.com.

So the Report Was Bearish for Corn... What Will You DO About It?

Jul 02, 2009
The corn market is bearish as prices factored in a very surprising USDA acreage report. Pre-report estimates suggested corn acreage at 84.158 mil, and instead the reported figure of 87.035 was well above even the range of estimates. With this spring’s wet planting conditions, many are somewhat surprised by the report.
 
Did you guess right? Or were you one of the surprised? Remember, in the big picture, it matters more what you do than what you think.  While reports sometimes change a trend temporarily, this report only accelerated a trend that was already in place. With such a downtrend, being heavily priced before the report, through the report and in the weeks that follow is the wise strategy. You see, the report caused a lot of short-term volatility, but it didn’t do much to change the long-term trend, and it shouldn’t change your wise strategy in response to that trend. In a few days, the volatility will settle down and all the hoopla and news surrounding the report will be behind us--nothing more than a distraction.
 
So don’t be distracted. Spend your valuable time thinking through your strategies so that if there is a trend change, you are ready to act. And if the trend continues down, you react by having adequate coverage in place.
Be sure to have the discipline in place to act. Discipline is key in marketing. You need to have the discipline to develop your strategy, track the indicators you are using, and implement your strategies when the signals are hit. It is far too easy to let an important market signal be hit and slip past you without acting on it.
Take for instance this planting season: You may have had a trigger point you decided on many months before and reaffirmed many times over, but when that signal was hit, you didn’t follow through because there was some market news that just sounded too tempting, like bullishness due to wet planting conditions. Then you were surprised by the bearish USDA report, and you regret your decision to wait. Now the price is too low, so you wait and hope it bounces back.
 
We have a saying in our office that “hope is not a strategy.” Hoping that prices go a little higher is not disciplined marketing. Rather, it is the strategic, disciplined marketer who has the most hope for taking advantage of opportunity in the market in the long run.
 
Scott Stewart is president and CEO of Stewart-Peterson, a commodity marketing education and advisory firm based in West Bend, Wis. You may reach Scott at 800-334-9779 or email him at scotts@stewart-peterson.com.
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