Sep 19, 2014
Home| Tools| Blogs| Discussions| Sign UpLogin


October 2010 Archive for Marketing Strategy

RSS By: Scott Stewart, AgWeb.com

Marketing Strategy

Thirteen habits and behaviors your competitors practice.

Oct 25, 2010

To put this blog in perspective, please allow me to recount a conversation I had with an Iowa producer. His words to me were: "I consider every farmer in the world a competitor. I will not help anyone make more money or be more successful." His reasoning was that he'd seen producers from South America come and buy land in his local area that he bid on. He viewed farmers everywhere, whether they be 10,000 miles away, three counties or three miles away, as competitive threats.

 
You may not consciously think of the farmers in your local area as competitors. Yet, when they want more land to plant crops, they sometimes look at the land you farm.
 
Do you ever wonder how other people—whether down the road or even in a neighboring county—possess the wherewithal to buy more acres or pay a higher rent or purchase new equipment?
 
Yes, there are people who pay a lot for farm land (either rent or purchase) that are overly aggressive and may, down the road, go out of business. There are others who can afford to pay a lot for land because they inherited a lot of land and have no debt. And then there are those who just are consistently able to pay more for rent or land because they are very profitable and have deep pockets.
 
I’d like to share with you 13 marketing habits of the successful grain producer, which I've witnessed over my 30 years in commodity marketing. These are behaviors that, I believe, position him to succeed in good times and bad.
 
  1. He knows Las Vegas is in Nevada and his farm isn’t, so he doesn’t “make bets.” Rather, he strategically positions himself to capture opportunity and protect against risk.
 
  1. He has his banker on speed dial for all the right reasons. He knows that an open, honest relationship, and being proactive and knowledgeable on the financials, is helpful to his pursuit of success.
 
  1. He looks at the big picture and doesn’t sweat the small stuff or dwell on the past. One poor sale or hedge doesn’t get him down; he’s looking at the weighted average of his entire crop.
 
  1. He knows that profit is profit, and he’s not afraid to lock it in. That’s because he understands the alternative is usually analysis paralysis.
 
  1. If you read this blog regularly, you’ve seen this one a few times: He knows how to use all the marketing tools available, even though he may not use all of them during a given pricing period.
 
  1. He’s not afraid to make mistakes because he knows there are marketing tools that can help him recover from mistakes and maintain flexibility as market trends turn.
 
  1. He remains consistent in his approach to marketing because he’s confident in it. He knows that if he jumps ship in bad times, he will more than likely jump at the wrong time.
 
  1. He doesn’t always follow the crowd. Sometimes when people are all on one side of the boat, it flips over.
 
  1. He never forgets that anything is possible. Just like you, he knows the Titanic went down and the Wright Brothers went up. He also believes that, when least expected, the price he gets for his production could go down or up.
 
  1. He’s wary of the news and pundits, knowing there is always a fundamental out there painting the wrong picture.
 
  1. He doesn’t get caught up in the here and now of his trades. If he decided for good reasons two months ago to sell corn at $5.25, he doesn’t change his mind when corn reaches $5.25 just because the guys on TV are bullish. In short, he maintains discipline.
 
  1. He recognizes that marketing is a combination of doing what the market tells you to do and what you need to do for your operation. The trading market offers signals to buy, sell, or hold. Those are important. At the same time, he keeps those signals within the context of what his operation can handle. If the market says sell, and he already has plenty of corn sold, he probably will look at other alternatives, including doing nothing.
 
  1. If he makes a mistake, he works hard to move beyond it rather than dwell on it or gamble and try to make it up. That’s because experience tells him his mistakes almost always create other opportunities.
 
One more secret: I encourage you to note which habits above, if any, that you don’t already follow. For starters, focus on changing just one or two of them. You’ll begin to position yourself to become more satisfied with your marketing.
 
 
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 scotts@stewart-peterson.com.
 
The data contained herein is believed to be drawn from reliable sources but cannot be guaranteed. Neither the information presented, nor any opinions expressed constitute a solicitation of the purchase or sale of any commodity. Those individuals acting on this information are responsible for their own actions. Commodity trading may not be suitable for all recipients of this report.  Futures trading involves risk of loss and should be carefully considered before investing.  Past performance may not be indicative of future results. Any reproduction, republication or other use of the information and thoughts expressed herein, without the express written permission of Stewart-Peterson Inc., is strictly prohibited. Copyright 2010 Stewart-Peterson Inc. All rights reserved.

There's a Friday in every week . . . and a surprise around every corner!

Oct 11, 2010

The potential for severe price swings is always with us. We’re now witnessing the impact of Friday’s USDA report. Nobody knows what the next bombshell will be or what day of the week it will arrive. That’s okay. What’s important is to know that one will come and be prepared for it.

 
Friday’s report showed once again that volatility and uncertainty are ever present in the markets. It really illustrates how futile it is to try to predict what the market might do. That's why it's so important to be prepared for whatever might happen. With structure and discipline built into your marketing, you would not be stressed over what to do next. You wouldn’t be worried about where the price of corn will go this week or next month.
 
Years back, we wrote the $12 Corn Special Report to highlight the ramifications of volatility as well as the need to be prepared for it. Nothing fundamentally has changed since the report came out. It’s as important as ever for you to have strategies in place for even the most extreme price scenarios. You can know what you will do if the market goes up a little, or if it goes up a lot. Know what you’ll do if the market goes down a little or goes down a lot. And know what you will do ahead of news like Friday's. If you'd like to read the $12 Corn Report, you can request a free copy by clicking here.
 
Today, the uncertainty is even greater than it was on Friday before the report. We've now dropped the corn carryover to below a billion bushels, yield forecasts have been slashed to 155.8 bushels per acre, and the stock-to-use ratio is down to 6.7. That's all very bullish. A fundamentalist could take this information and easily forecast substantially higher prices. Yet, most major market tops are made on bullish news, and we already have corn prices approaching 6.00. You really have to question whether the USDA isn't being overly influenced by the early harvested corn yields. From our perspective, for every acre out there that there is a disappointing yield, there is another acre out there that has a record yield. You have to question whether the 155.8 number isn't the lowest number we're going to see. To add even more uncertainty, the historical pattern shows that when the USDA drops the yield forecast in October, they do it again in November. The markets are already anticipating that to some degree. So as usual, you can go on all day long, listing bullish and bearish reasons and getting more and more confused.
 
What isn't uncertain is that this bullish move offers some excellent pricing opportunities, and at these price levels, even those of you that may have disappointing yields are still looking at pretty attractive per-acre revenue numbers. Don't let this rally get away from you and miss out on the opportunity it presents. If you want to be bullish and let it run, go for it. Just be sure to follow the rally very closely with trigger points to get sold the minute it starts to falter. Spread out your sales, don't put all your eggs in one basket, and work for a good high average price. Don't curse the volatility, embrace the opportunity it is presenting.
 
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 scotts@stewart-peterson.com.
 
The data contained herein is believed to be drawn from reliable sources but cannot be guaranteed. Neither the information presented, nor any opinions expressed constitute a solicitation of the purchase or sale of any commodity. Those individuals acting on this information are responsible for their own actions. Commodity trading may not be suitable for all recipients of this report.  Futures trading involves risk of loss and should be carefully considered before investing.  Past performance may not be indicative of future results. Any reproduction, republication or other use of the information and thoughts expressed herein, without the express written permission of Stewart-Peterson Inc., is strictly prohibited. Copyright 2010 Stewart-Peterson Inc. All rights reserved.
 

Learn the Language of Marketing

Oct 08, 2010

Learn the language of marketing

China is often in the news for its purchases and rumored purchases of grain. Let’s look at China and your marketing in a different light: language.
 
If you could speak and write Chinese, would it help you with your marketing? Not likely. However, it may be helpful to know this: There are approximately 80,000 Chinese characters, and a person needs to know only a few thousand to read and write modern Chinese. That’s about 5 percent. Translation for your marketing: There are approximately 10,000 combinations of marketing tools available, and you need to know only a fraction of them in order to begin to position yourself for marketing success.
 
Knowing 11 marketing tools—or about 0.1 percent of what you could implement—will help you understand how you can take advantage of opportunities and protect against risk. Marketing tools can help you do marketing well. So, wouldn’t understanding 11 of them be worth your time?
 
Ultimately, you need to both understand the tools and know when to use them in order to become confident with your marketing. Successful marketing also demands a number of other factors, including time commitment and constant preparation. Understanding tools is just your first step to doing marketing well . . . and you can do marketing well.
 
The 11 most common marketing tools are:
  1. Futures, buying and selling
  2. Calls, buying and selling
  3. Puts, buying and selling
  4. Bear put spreads
  5. Bull call spreads
  6. Bull/bear fences
  7. Ratio Call spreads
  8. Ratio Put spreads
  9. Forward contracts
  10. Hedged-to-Arrive contracts (also known as futures only contracts)
  11. Basis contracts
 
How might some of these tools apply to your marketing?
 
The price of corn has risen significantly since July. At the beginning of this rally, buying calls was probably the simplest solution. With the benefit of hindsight, it’s easy to see how this marketing tool would have positioned you to sell at today’s higher price than the July cash price. Keep in mind, some producers sold early into the rally at the cash price.
 
Now that the market has moved substantially higher, getting a long position in place is a bit more complicated. The downside risk or even a downside correction risk is very high and at least equal to what rally potential may be left in the market. Looking at your toolbox, you might pull out a ratio spread, if you feel the need to re-own right here.
 
A ratio spread is composed of selling an at-the-money call and buying three or more out-of-the-money calls. The general idea is that if the market goes higher, the delta of the bought calls more than offsets the one sold call working against you for a net gain.
 
In the event the position is put in place and the market falls apart, the sold call premium will cover a good portion of the bought call premium, lowering your cost exposure. The risk with this position is a stagnant market, where both positions generally work against you. The maximum risk would be if the market closed at the level of the bought calls at expiration. It is best to liquidate the position at least 60 days before expiration.
 
You could do nothing. Perhaps the market will go higher. If it did, would you sell? The risk with doing nothing is that it’s akin to being unprepared. And, lack of preparation causes you to time the market and make decisions based on emotion. It’s an approach that likely will not help you achieve a better than average price for your entire crop.
 
Do you want to do marketing well? I encourage you to learn how and why marketing tools get implemented, even if they seem like another language to you. Very few things in life are achieved without effort. Yet, when you put the right effort into your marketing, in the right places, you can do marketing well.
 
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 scotts@stewart-peterson.com.
 
The data contained herein is believed to be drawn from reliable sources but cannot be guaranteed. Neither the information presented, nor any opinions expressed constitute a solicitation of the purchase or sale of any commodity. Those individuals acting on this information are responsible for their own actions. Commodity trading may not be suitable for all recipients of this report.  Futures trading involves risk of loss and should be carefully considered before investing.  Past performance may not be indicative of future results. Any reproduction, republication or other use of the information and thoughts expressed herein, without the express written permission of Stewart-Peterson Inc., is strictly prohibited. Copyright 2010 Stewart-Peterson Inc. All rights reserved.
Log In or Sign Up to comment

COMMENTS

Receive the latest news, information and commentary customized for you. Sign up to receive Top Producer's eNewsletter today!

 
 
 
 
The Home Page of Agriculture
© 2014 Farm Journal, Inc. All Rights Reserved|Web site design and development by AmericanEagle.com|Site Map|Privacy Policy|Terms & Conditions