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Marketing tip: Sell something between Feb-May

Agriculture.com Staff 02/06/2016 @ 9:57pm

Unlike many farmers, the fact that you have even decided to read this shows you have at least a little interest in marketing ideas for your crop.

After recently attending a marketing class titled Winning the Game , offered by Iowa State University (ISU) Extension, the message sent to producers was to " plan your trades and trade your plan. "

The Winning the Game marketing plan was devised by the Center for Farm Financial Management, University of Minnesota. With different versions of the game, this class focused on a pre-harvest marketing plan.

In its simplest form, the marketing plan creates a discipline for farmers to set a number of dates to sell a certain amount of bushels of their crop. By designating a minimum price target based on cost of production and the loan rate, and a realistic top price you are shooting for, the plan removes emotional decisions for producers at selling time.

"If you planned to sell 10,000 bushels of corn on April 15 and you see the price hasn't hit your marketing plans high price yet, you still sell," Bob Wells, ISU Extension field specialist told a classroom full of farmers and bankers.

Wells added, "Despite what analysts and brokers say, farmers know what they need to break even, based on their own situations."

A great marketing plan doesn't include a farmer finding the high price to sell at, instead finding an extra 10-20 cents per bushel with a plan that avoids mistakes, according to the Winning the Game marketing plan.

Along with setting disciplined selling benchmarks such as minimum low prices and a realistic high price, the 'Winning the Game' formula also encourages producers to use crop insurance coverage to protect production risks.

Wells explained to the class the importance of taking advantage of seasonal price trends when setting sale dates.

Based on a 25-year seasonal price history, the high for the Dec. corn futures contract will occur between mid-February and mid-May 70% of the time.

"The sad reality is that very few farmers sell even 50% of their crop before harvest. That's not good," Wells said. Wells added, "Between mid-February and mid-May don't forget to sell something."

Jim Meade, an Iowa City, Iowa, farmer attending his fourth Winning the Game session, said picking the dates to sell is difficult. "Picking a minimum price to sell at is not too bad," Meade said. "Deciding what the steps are is not so obvious to me. Do I take five-cent increments, some other number, who knows?"

Meade added, "The fear is that if conditions seem to change, farmers will look at their plan and if they put down the price steps willy-nilly and have no good reason for picking them, they will have no hesitation to changing them. Presto, you have no plan anymore. Corn looks like it's going up, you put off a sale, then it goes down and you've missed the sale and now you're plan is out the window. So, how do you pick good intermediate price steps?"

This dilemma of choosing dates to sell came up this week in the Marketing Talk section of Agriculture.com. Web poster WisDave said he chooses sell dates based on when he wants to be 100% sold.

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