I talk with Greg Peterson each Monday morning on “AgriTalk.“ Greg’s insights and data into what’s happening in the used machinery market are important when making big-dollar purchasing decisions.
For many crop and livestock producers, equipment upgrades take planning and mean taking on debt. It’s the kind of purchase worthy of strategy.
LINK SALES TO STRATEGIES
The concept of “goal-based marketing” is easy to understand. The strategy links the sale of crops or livestock to a goal for your business. It could be buying equipment, paying off debt, herd expansion, — even retirement. It’s a strategy to employ at a time when markets are offering opportunities to book profits. (In break-even years, avoiding a loss might be all the goal you need.)
It’s the lack of execution that can turn a goal-based marketing strategy into another delayed equipment upgrade. Most often, the error is made early in the process rather than when it’s time to make sales.
IDENTIFY PROFIT OPPORTUNITIES
Check the longer-term market outlook. Market outlook comes first, and price outlook comes second.
This means evaluating how quickly changing market fundamentals and long-term, slow-to-develop trends might influence prices between now and five years out.
- The Renewable Fuels Standard was a change in market fundamentals. It attracted investment to an industry that eventually added 5 billion bushels to domestic corn demand. That was a major change that generated multiple years of profit opportunity. Think about renewable diesel, sustainable aviation fuel and the investment being made in the U.S. oilseed crushing industry.
- In each of the four years leading up to the 2021/22 marketing year, there was more corn consumed around the world than was produced. In 2021/22, 99% of corn production is expected to be used. That’s a trend that demands more corn acres — and it’s a long-term, slow-to-develop trend that acts like a rising tide under profit potential.
Admittedly, it takes imagination to evaluate how something happening today will influence profitability over the next five years, but missing those market signals means missing the opportunity to use a goal-based marketing strategy.
Only you can identify efforts worthy of goal-based marketing, but goal-based marketing can be a multiyear effort.
DO THE MATH
Think through:
- What’s the dollar amount needed?
- Dollars needed divided by acres committed (it doesn’t have to be all your acres).
- When the combination of yield and cash price hits targeted profits, make the sale.
I am not saying making a profit is as simple as planning for a profit – that’s not how commodity markets work. I am saying making a plan for profits brings discipline.
Too many times, growers view a cash sale as a “give up.” (“Prices are done going up — I guess I better sell.”) If profits are already designated for growth, making a sale is done with purpose – it’s executing a strategy.
Check the latest market prices in AgWeb’s Commodity Markets Center.
