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Marketing Strategy

RSS By: Scott Stewart, AgWeb.com

Marketing Strategy

Weekends Are a Lot Like Marketing

Jan 22, 2010
If you’ve been watching NFL playoff games these past weekends, you’ve no doubt heard references to the best teams having a “balanced attack.” You’ve also got to attack marketing with balance if you hope to take control of the game.
 
I will go a step further and say that without balance in marketing, you won’t be in the game. So here’s how you get it.
 
Look at the balance between the opportunities you can potentially receive and the risks you’re taking. Also, consider the need to balance the amount of crop you have priced against the amount of crop that's un-priced. While there’s much more to cover in a discussion of balance, these are good starting points.
 
If you spend a fortune, you can manage every risk and every opportunity. But then you've spent so much money, you've eliminated all opportunity to ever make any money. At the same time, if you don't invest in marketing to manage some of the risks, you’ll have unlimited risk.
 
So you have to have balance, sort of a sweet spot, where you're investing enough money to cover your risks while still being in position to manage and take advantage of opportunities. Don’t invest too little or too much, or you might get blindsided.
 
Another principle to think about when looking at balance is the amount of crop that you have priced. For example, it's critical that, in a bull market, you have a substantial amount of your crop un-priced or re-owned so you can take advantage of the trend.
 
We've found through experience that if you have about 70% of your crop un-priced in a bull market, you’ll have opportunity to take advantage of the majority of the move. The roughly 30% of your crop that you might have priced at lower levels won't substantially hurt you relative to the approximately 70% of your crop that you own and have available to sell at higher prices. 
 
At the same time, if you have somewhere around 70% of your crop priced in a downward moving market, the percentage of the crop un-priced, about 30%, won't substantially hurt you when compared to the amount that you do have priced. 
 
Okay, so picture this. If you’re about 70% un-priced when the market is rallying, and roughly 70% priced if the market is declining, what you've got left is about 30% of the crop on either side—30% either priced or un-priced—that you're not as concerned about. That's 60% total on the two ends of the spectrum.
 
What you should really be concerned about is that 40% in the middle. A big part of having balance in marketing is knowing what you want to do with that 40%. 
 
Obviously, you need to think about your entire crop. But a big, big part of having a balanced strategy and adapting to market moves is managing that middle part of the crop. You’re shifting it from being either aggressively priced or being un-priced as the market changes trend and direction. 
 
The concept of balance extends to a much higher level when you consider the key aspect of leverage. And, for another day, there are multiple forms of leverage to think about. In this blog—and in the spirit football, balanced attacks, and helping you take your marketing to the next level—I simply want to provide a couple of examples to emphasize the importance of balance in marketing.
 
I should add that while I do believe in focusing on the 40% of crop in the middle mentioned earlier, you can be 100% priced and still be balanced—as long as you have thought through how you’ll counter that 100% priced position if the market trend changes. 
 
You always—always—have to pre-plan your moves. Know what you're going to do, how you're going to do it, and why you're doing it. That's just smart, strategic, disciplined marketing.
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COMMENTS (2 Comments)

Scott Stewart
Bogey-four: Thank you for the comment. In short, I would recommend using more marketing tools. Marketing and moving/storing are two separate tasks. If a person has no storage, he can sell off his crop in the fall and use paper positions to re-own a portion if he feels he needs to be long. Although, I do think a person should be hedging ahead versus selling the crop whenever it makes logistical sense to move it. That’s an example of using more marketing tools. The elevator should not be your only option or you will be at its mercy. Building your own bins can be less stressful, and you can gain the carry in the market if you use the bin right. However, be cautious with building a bin. Too often we see that people just use them as a way not to make a decision they know they should make.
12:06 AM Feb 2nd
 
bogey-four
how can we market grain when the local elevator's storage is so easily filled.
5:57 PM Jan 22nd
 

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