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Marketing Without Emotion
Marketing your grain can be an emotional roller-coaster, especially with the dramatic high and low prices this past decade! When to price? How much to price? Should I price? What if I price, and it goes higher? Breathe.
What do we tell people when they’re asking all these questions? Take emotion out of marketing. Instead, focus on the math. Here’s a quick hit list of what we’ve discovered helps with this focus:
- Make the numbers black and white.
- Look at historical statistics.
- Consider the probability points.
- Make time for marketing.
Emotionally, many producers likely feel the price of corn will never rally again because of the huge glut of supply in farmers’ hands right now. Yields, for THREE years in a row, have been tremendous. And, this is satisfying the global demand that continues to grow. Statistically speaking, when looking at USDA weekly crop progress ratings over the past 30 years, you can definitely see a pattern of final yield potential based on crop development early in the growing cycle.
Let’s take a step back and look at these numbers. In 2014, 2015, and 2016 for the growing week “25” or essentially the third week of June, the U.S. corn crop in the “good to excellent” category was rated as 74%, 71%, and 75% respectively. The final yield result of corn in those years was expected trend line or HIGHER. Final yield in 2014 was 171 bushels per acre (bpa). In 2015 final yield was 168.4 bpa, with 2016 yielding a record crop of 174.6 bpa.
The most recent weekly crop progress rating pegged the U.S. corn crop as 67% good to excellent, with key states of Illinois, Indiana, and Ohio lagging dramatically from the extensive replant in those states. Curiosity got the best of me, and I looked back the past 30 years to see how final yields ended in years with a similar rating for this week of June. The result? Final yields were, at best, expected trend line. Many years came in below expected trend line. In fact, in recent history, the 2013 crop was 65% good to excellent and final yields came in at 158.1. Trade was expecting a trend line closer to 161 bpa. In 2011, the good to excellent category for that week in history was 68% good to excellent, with final yields coming in at 146.8 bpa. Trendline was expected closer to 157 bpa.
Historically and statistically speaking, the crop this year, at best, could be trend line at 171 bpa (which is really good). Now, plug the trend line into current supply-and-demand tables, and ending stocks actually decrease to 2.0 billion bushels – down from 2.295 this year. If yield comes in at 167 bpa, then ending stocks decrease to 1.8 billion bushels. Trade reacts to perception of ending stocks either getting smaller or getting larger.
For the past two years, corn prices have been lower due to the perception of larger, and getting larger, endings stocks. Potentially, that’s all about to change. Add to it that the extreme damage of the spring wheat crop, and the lowest number of wheat acres planted in decades in the Dakotas. What if the price of Minneapolis wheat is able to rally substantially due to a lack of supply? Farmers in the Dakotas might go back to planting wheat instead of corn and soybeans. This could put in an early fight for acres in 2018.
Step back. Look at the numbers. Take emotion out of marketing. By doing so, you could be prepared for some unexpected (or in my book, expected) final yields and market changes.
If you have questions, you can reach Naomi at email@example.com .
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