In the second part of his two-part blog on lenders and marketing, guest blogger Mike Hogan, commercial analyst with Stewart-Peterson Inc., shares comments from ag lenders who participated in a simulated marketing activity.
This spring, I had a unique opportunity to help lenders experience what it’s like to be in the shoes of a producer making marketing decisions. Through a farm marketing simulation activity that Stewart-Peterson created, lenders attending the trade show at the Wisconsin Banking Association’s Ag Lenders Conference in mid-April had the opportunity to market one month’s worth of milk production for a 400-head dairy and one month’s purchases of soymeal.
To help participants experience the risk that occurs in the real world, the activity included three pricing periods and as the market moved (within the three periods) each participant’s weighted average price, or WAP, also moved. We call the simulation What’s Your WAP? and I explained more about it and which marketing strategies faired best in this recent blog post "Simulation activity underscores the difference strategic marketing makes"
In visiting with lenders who participated in the simulation, many agree that the experience gave them great perspective – both in better understanding the market and in grasping the emotional factors that influence decision making.
Jason Lindeman, vice president and agricultural loan officer at AbbyBank in Abbotsford, Wis., valued the exercise because it required making decisions and showed the outcome from those decisions.
Jason shared with me that he liked the tangible learning experience What’s Your WAP? offered compared to simply talking about "what if" scenarios. "The exercise definitely gives participants a better understanding of the impact of your trades made," he said.
Because of this Jason added, "I think producers hesitant on buying into marketing would be more likely to market their milk and feed after doing a simulation like this."
As well, Jason said the marketing activity demonstrates how important planning and consistency are in marketing. "It’s important to have – and remember – your plan in marketing and not get too greedy when the opportunity is there to meet your marketing objective."
Brad Guse, vice president and agricultural banking officer with BMO Harris Bank in Marshfield, Wis., also found value in the activity.
Interestingly, it was Brad’s suggestion about a year ago that prompted us to develop What’s Your WAP? He wanted to see something developed that would help lenders "practice what they preach" and give them a chance to experience what it’s like to make marketing decisions and see the results.
Of his experience with What’s Your WAP? Brad told me, "It certainly put us in the producer’s shoes. We felt the emotions and angst that goes along with making decisions and pulling the trigger."
Because new market information was shared with participants in each of the three trading decisions, Brad said he also felt the pressure of having to make relatively quick decisions, and he admitted he’s now more cognizant you don’t always have enough time to make the best decisions.
For me, this really underscores the importance of pre-planning marketing. Marketers who know what they’re going to do in advance if the market goes up a little or a lot, or down a little or a lot avoid having to make difficult decisions in the heat of the moment. Emotional decisions often turn out poorly.
I asked Brad if he was surprised to learn that those marketers who were active, but not too aggressive, ended up with the best weighted average price (WAP) for both milk and soymeal in the end. He said he wasn’t – and compared it to the tortoise and the hare. "Steady and consistent is important in risk management. That’s the lesson. You don’t want a strike out that takes you out of business."
I couldn’t agree more. Marketing is a marathon, not a sprint. There are no shortcuts
that yield long-term success.
Mike Hogan is a commercial analyst for Stewart-Peterson, a commodity marketing consulting firm based in West Bend, Wis. You may reach Mike at 800-334-9779, email him at email@example.com
Scott Stewart is 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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