Here’s a simple idiom with potentially profound implications: Don’t bite off more than you can chew. Whether applied to eating steak, making personal commitments or managing commodity price risk, ignoring this advice can result in unwanted or even disastrous consequences.
I’m reminded of this phrase when I hear from farmers who’ve had bad experiences with marketing. Much of the time, those experiences can be traced back to doing too much at once. That’s a problem you can easily solve.
Let’s define "doing too much at once." In this context, it refers not to the amount of production committed or contracts purchased. Rather, it has to do with engaging in marketing without committing the time necessary to see things through.
It would be like rushing through training for a marathon. You’d be sore. You might feel like stopping or quitting altogether. It wouldn’t matter if you had run races before or were completely new to it. If you tried to do too much at once, you’d risk injury and pain.
For those of you who have been around the block with marketing as well as to those who haven’t yet started, what if you tried committing to consistent marketing? What if you took a percentage of your production – 10 percent or 100 percent, you decide – and treated it like a marathon?
Decisions would be made with the far-off finish line in mind: your weighted average price (WAP). WAP is the value of priced bushels, un-priced bushels assigned the current market value, and hedge positions. It is a means for you to measure the quality of your marketing decisions. Getting an accurate measurement requires a commitment to consistent marketing over time.
Short-term results would have less emotional impact. If you sold corn today at $5 and saw it rally to $5.25, you’d still be around to see it drop to $4.50. That’s a hypothetical scenario. The point is that the market is always going to move, and one decision – good or bad – doesn’t tell the whole story.
If you’ve had a bad experience with marketing or no experience at all, I encourage you to start slowly and work your way up. Pace yourself. Develop some simple strategies and maintain the discipline to execute them.
If you start small and stay consistent, you may not see big results. However, you will learn, and there’s great value in learning what marketing can do for you. Not to mention, you’ll learn more about yourself.
Are you the type of person with the stick-to-itiveness so necessary to becoming satisfied with your marketing? As we enter what could be a period of lower volatility, now could be a great time to get yourself to the starting line.
Scott Stewart is CEO of Stewart-Peterson Inc., a commodity marketing consulting firm based in West Bend, Wis. You may reach Scott at 800-334-9779, email him at [email protected]
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