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Marketing despite a future of black swans
So, I was all set to moderate a great panel on the "Buying
Power of the U.S. Dollar" at the recent Commodity Classic. I had assembled
an all-star cast to help me talk about the uncertain economic environment in
which we all find ourselves. Charts and statistics were ready to tell our
Then came something that none of us planned for: A weather
warning sent all Commodity Classic attendees, exhibitors, the all-star
panelists and their humble moderator into the lower level of the convention center.
Our best planning was tossed aside by this Black Swan weather event. Whoever
expected an entire convention could be moved to the basement?
The point is, we do indeed live in uncertain times. All the
information gathering, all the analyzing, all the plans we make can be
disrupted by something unexpected. And it seems that those unexpected things
are coming more frequently these days. That requires a shift in our thinking.
We have to become more nimble and more prepared with
contingency plans when it comes to our marketing. At Stewart-Peterson, we call
it Market Scenario Planning(sm). It means that you strategize for what you will
do if the price moves any direction, such as up a little (scenario A), down a
little (scenario B), up a lot (scenario C) or down a lot (scenario D).
Preparing for pricing opportunities for marketing your grain
this year may prove to be one of the most difficult years yet, as unpredictable
things such as weather are crucial factors this year. Weather, market sensitivity
to both U.S. and global economic conditions, an emerging middle class in China
and India, and Middle East tension -- all these spell uncertainty like never before.
At any time, one or more unexpected outside events can come in and "trump"
whatever the prescribed "most important fundamental event" is at any
Having the ability to mentally and emotionally shift your
marketing scenario plan on the fly, because you have prepared for all of the "what-ifs"
ahead of time, is how producers will emerge unscathed from the annual and ever
Had the Black Swan not flown into the room at Commodity
Classic, one of our panelists, Thomas Dorr, President and CEO of the U.S.
Grains Council, was prepared to say this regarding the future fundamentals that
the grain markets will face:
"Clearly, while foreign corn demand has continued to
climb, high corn prices have stimulated corn production around the world.
Economic growth that fuels consumer demand is coupled with high prices that stimulate
production. These factors far outweigh exchange rates in determining corn
export demand. And future demand will be driven by economic growth in developing
Dorr offers up these statistics:
<UL><LI>95% of the world's population lives
outside the Unites States.</LI>
<LI> Growth of the middle class in the next 20 years
will come from developing countries. They are the engines of demand growth.</LI>
<LI>The "middle class" in developing
countries could reach 616 million households by 2020, up 138% from 2009 levels.</LI>
<LI>Today, 25% of households in these developing
countries are middle class. By 2020, middle-class households could account for
49% of these developing countries' populations, and the impact on food
consumption will be large.</LI></UL>
Of course, the buying capabilities of these developing
nations are dependent upon global political and economic events outside of the
control of the average U.S. farmer. And so, the best thing to do is to prepare strategies
for multiple future scenarios, so that you are not caught unprepared.
If you have questions, you can reach Naomi at <a
or post a marketing question in the <a href="http://community.agriculture.com/t5/Women-In-Ag/bd-p/women-in-ag"
target="new">Women in Ag forum</a>.
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
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Stewart-Peterson Inc., is strictly prohibited. Copyright 2012 Stewart-Peterson
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