Stop Predicting, Start Empowering

Published on: 10:35AM Apr 21, 2009

Welcome to a very different type of marketing column. This blog is designed not simply to report what is happening in the markets and what you can do in response, but rather to help you become a better marketer. How? By helping you break some lifelong habits, and teaching you to look at marketing in a different way.
What do I mean by life-long habits? Well, do any of these sound familiar?
  • Gathering as much information as possible to make a good marketing decision, but missing a price move in the process.
  • Wanting to make a sale but agonizing over pulling the trigger and getting it done.
  • Hoping prices will go up a bit more before making the sale, only to miss an opportunity.
  • Basing marketing decisions on someone’s market outlook, only to find out that the outlook was wrong, or fundamentals changed, and now my plans no longer apply.
  • Knowing I am the best producer I can be, but beating myself up for selling my crop ineffectively.
This blog will be based on one key concept: Marketing should be strategic. It should not be based on a price outlook. The whole foundation behind my approach to marketing is making decisions based on strategy rather than market outlook. It is my belief that you cannot predict prices. Sure, you can try, and it is definitely kind of fun. But in the end, trying to predict prices costs you money. Predicting prices takes your focus away from the real role of marketing: managing opportunities and risks.
I do not mean to suggest that fundamental and technical analysis of the markets and price patterns is irrelevant. But spending an inordinate amount of time gathering information about market outlook is misdirected effort.
Let’s quickly analyze the history of crop markets and see if I can convince you why you don’t want to put your effort into predicting prices. Look back over 20 or 30 years worth of price charts. With only a couple of odd exceptions, almost every major high or low in prices can be directly attributed to either a big crop or a small crop. What determines a big crop vs. a small crop? It’s not acreage… It’s yield. The biggest detriment to yields is weather. If you have good weather, you get big yields; if you have poor weather, you get lousy yields.
How many of us can accurately predict the weather long term? If you cannot predict the weather, you cannot predict crop size, which means you cannot predict prices. If you cannot predict prices, then why base marketing on a price outlook?
What’s more, who can predict bank failures and all the other economic turmoil thrown at us every day? There are obviously many more uncertainties affecting the markets than ever before.
But how can you make a marketing decision without an outlook? The answer is this: Use strategy. Plan for how you will manage the opportunity of a price rally. Equally important, plan for and be ready to execute your pre-planned actions should prices fall. Be prepared and positioned to manage and benefit from whatever opportunity or risk the market throws your way.
Don’t worry. I’ll give you examples of sound strategy in later columns.
Why am I so passionate about this approach? I’ve seen producers spend a lifetime trying to predict prices and do the right thing in response. When the markets were not so volatile and the stakes were not so high, producers could afford to be wrong once in awhile—it just meant they didn’t get to buy the new piece of equipment they hoped to buy. Now, with faster, more uncertain markets, mistakes are more costly than ever before. Those who get it right will be buying out those who get it wrong. I want to see as many producers as possible make good marketing decisions and maintain the profitability and success of their farm operations. Maintaining many successful, independent farm operations is good for our rural communities, and for the American economy.
It’s like the old proverb about teaching a person to fish. I could simply give you marketing outlook and some suggestions for how to react. Or, I can teach you how to empower yourself with strategic thinking about marketing as it relates to your business goals. Check in again, and let’s make this year a great one!
Scott Stewart is president and CEO of Stewart-Peterson, a commodity marketing education and advisory firm based in West Bend, Wis.