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Marketing despite a future of black swans

03/16/2012 @ 7:40am

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 story.

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 time.

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 changing volatility.

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 countries."

Dorr offers up these statistics:

  • 95% of the world's population lives outside the Unites States.

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