Three farm marketing lessons from rain
Jun 27, 2011
There’s no question rainfall is necessary. How much will we get and when? Those are perennial questions. This year, the answer hasn’t been good in either case.
Much of the Midwest has experienced a wet year at the wrong time. Swollen rivers caused by heavy rains have flooded towns and farm fields. In Minot, North Dakota, snowmelt and unusually wet weather are wreaking havoc. Minnesota has seen considerable rainfall after record winter snowfall. The Minnesota Crop Report from May 2 showed 1% of corn planted versus 84% planted at the same time last year. Who would’ve thought?
Aside from unpredictability, what can rain teach about marketing? Here are three key lessons to keep in mind next time the sky pours forth and throws a wrench into your livelihood.
1. Situations can change quickly. A field that’s dry one day can be flooded the next, sometimes without clear warning. You may see rain in a forecast and still be overwhelmed by the volume and speed with which it hits.
Lessons for your marketing: Remember that market conditions change quickly, so prepare for the possibilities, capture opportunities, and minimize your risks. July corn futures peaked on June 10 at just over $7.99, and on June 23 we hit a low of $6.39, approximately a 20 percent swing. December corn contracts peaked on June 9 at about $7.22 and hit $6.20 on June 23, not quite as significant a difference as July, yet a dollar a bushel is nothing to sneeze at. Did you prepare for a possible drop and make some sales earlier this month?
2. Forecasts are only forecasts. It’s important to know what the weather might do but you can’t bank on what it actually will do.
Lessons for your marketing: Move away from a price outlook approach to marketing and take a strategic approach. Develop strategies for whatever the market may do. There are too many market factors over which there is no control. Using outlook as a filter can help you make strategic decisions. Just like with weather, it’s important to know what might occur with price. Yet, in marketing and meteorology, it’s impossible to predict what actually will happen. You’ve see rain fall when it wasn’t in the forecast, right? Prices can fall when all fundamentals point to higher prices.
3. Rain doesn’t discriminate. Many parts of the Midwest are drenched, yet drought is taking hold around us. Areas of Kansas and upper Michigan have been abnormally dry. Rivers in Iowa were running low last month. Droughty conditions in Oklahoma and farther south have been moving northward. Rainfall amounts leave some people dancing in the rain and compel others to do a rain dance.
Lessons for your marketing: All other factors among neighbors being equal, the markets can hurt one person’s profitability much more than the next guy’s. Put a hedge line of credit into place so that your marketing decisions aren’t being influenced by cash flow or availability of funds. Learn to use options. Market your entire production. And, become a marketing expert or hire one. In broader terms, protect what you work so hard to earn from markets that know neither mercy nor boundaries.
Scott Stewart is president and CEO of Stewart-Peterson, a commodity marketing consulting firm based in West Bend, Wis. You may reach Scott at 800-334-9779, email him at firstname.lastname@example.org.
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