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The three M's of marketing

Al Kluis 07/27/2011 @ 2:48pm

I conducted a marketing and technology survey with some of the farmers I worked with this spring. I got several questions and had a huge response with a lot of good suggestions.

One question was, “What is the hardest part of marketing?” I was surprised at how many farmers are still going back to last year and kicking themselves for selling too much too early. It really bothered some, who said it had caused a lot of stress in their farm partnerships.

December 2011 Corn

I tell people not to look back at the decisions they made last year. It is time to look ahead and to focus on new crop profit opportunities. The 2010 year was very profitable for most grain farmers. I look for 2011 to be another profitable year if you are in an area with good yield potential.

So how do you improve your marketing? Look at three M's: Mind, Motion, and Money. Like a three-legged stool, you need all three M's to be successful.

Mind:

Learn all you can. If you do not enjoy marketing or you are not willing to attend some seminars or webinars to learn more, turn it over to someone on your team who will.

Here are some of the common actions good marketers take.

● They write down their marketing plan and review it on a regular basis.

● They make marketing a year-round project and stay updated on market news, price movement, and basis change each day.

“It is time to look ahead and to focus on new crop profit opportunities. … I look for 2011 to be another profitable year if you are in an area with good yield potential.”

● They review the markets early each morning and make decisions early in the day (not during market hours).

● They think through a plan and do not panic when they hear negative news during the day.

● They have a positive attitude about farming and how they approach marketing.

Motion:

With all of the Wall Street money coming into the grain markets, there is as much motion (volatility) some weeks as there used to be in an entire year. This price volatility creates a lot of opportunities; it also creates a lot of stress.

Here are several suggestions to help you get a handle on the record volatility in the grain markets.

● Sell in smaller increments. By making a series of 10% sales, you will have some made when prices are low, but you will also have some made when prices are high. It is the final average that counts.

● Use a combination of marketing tools. I use mainly hedges and hedge-to-arrive contracts when I am getting new crop grain sold ahead. I also use some put options for farmers who are uncertain of their crops or who do not want to make a delivery commitment. Some long-time customers use forward contracts and basis contracts.

● Stay consistent. If you usually get 40% to 50% of your new crop forward-sold, do it each year. The farmers who sold aggressively ahead in 2010 and are not willing to sell any ahead in 2011 are likely to make the wrong financial move two years in a row.

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