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5 Ways to Improve Your Marketing Plan in 2015
I have worked with farmers for over 40 years. The vast majority of the time, I enjoy answering the phone and talking about the grain markets. However, late last summer, I had some of the toughest calls ever. They came from farmers who were still holding on to some – or all – of their 2013 corn crop.
Some of the callers were angry, some were embarrassed, and all were frustrated. Even though a few were not my customers, I patiently asked them how they made decisions and what their marketing plans were. Many callers admitted they did not have a plan. Most watched the markets each day and hoped that prices would rebound. More than once, I told a caller that hope was not a marketing plan.
One call in early September 2014 has really stayed with me. It was from a young farmer in Iowa who still had all of his 2013 corn. He asked me for help in learning how to make better decisions. He said, “If I don’t learn how to do a better job of marketing, I will not be farming much longer.”
I gave him five tips. These same strategies will help you improve your marketing plan in 2015.
Tip #1: Create a Marketing Plan
To do that, you’ll need to zero in and examine five key areas:
• Your Cost of Production. Take your numbers (not someone else’s estimates) and figure it out to the penny. As crop conditions and yield potentials change, update your breakeven numbers.
• Your Storage Position. Pencil out how much you can hold and how much you need to sell ahead.
• Your Local Basis. Chart it out. This takes some time, but it is an essential part of your plan.
• Your Marketing Team. The farmers who do a good job year in and year out have built a good team who makes decisions together.
• Your Schedule. Meet with your marketing team and review the plan at least weekly. I encourage you to do this first thing on Monday morning. Look at your plan, update your price charts and basis charts, and make sure your offers are called in. It’s important to hold this weekly meeting even when you are busy planting and harvesting.
Tip #2: Make Incremental Sales
With the increased volatility in the grain markets, making a series of 10% to 15% (or five 20%) sales will work a lot better than trying to hit the top. In the March 2015 CBOT Corn chart and the March 2015 CBOT Soybeans chart, you’ll see where I made sales and where I have set my existing offers. None of these were at the top, but I did have a good average selling price. Once an order is filled ask yourself, “Where do I make the next sale?”
Tip #3: Use Price Targets and Call In Your Offers
If the March corn chart has resistance at $4.05, then have a resting offer in to sell some at $4.04.
For March soybeans, if you know resistance is at $11.06, then have an offer to make a sale at $11.04.
The majority of my subscribers do not trade futures or options, but they do watch charts, and they know where to place orders to get their cash grain sold or new crop contracted ahead.
I have noticed how often offers above the market are filled in the night trade. That is another reason to have the offers called in.
Tip #4: Use Time Targets as Well as Price Targets
When I first learned about futures trading and charting, one key concept was drilled into my head: Time is more important than price.
As an example, let’s say I have a price target to sell 10% or 20% of my new-crop corn if December 15 corn rallies to $4.50. If prices don’t hit my price target, I check the calendar for my time target, and (for this example) by the week of April 24, I will make a sale anyway.
There’s an old timing rule that says, “Sweep the corn and soybean bins by the Fourth of July.” That philosophy worked well in 2014. It was not the top, but it was a lot better than where prices were six weeks later.
Tip #5: Use All of Your Alternatives
Farmers who use hedges, hedge-to-arrive contracts, and puts have a huge advantage over farmers who will only make cash sales.
I had way too many calls come in this last summer from farmers who held on to 100% of their 2013 corn. They held it too long, and the only alternative they would consider was cash sales.
I have worked with a lot of farmers who thought that if they were really good at growing a crop, they could prosper.
I like to tell those farmers what one of my good friends and longtime customers from Colorado told me: You cannot produce your way to profitability.
From the Al Kluis
2015 Farmers Almanac
10 Things Good Marketers
Continue to Do
1: They write down their marketing plan and review it regularly.
2: They make marketing a year-round project.
3: They stay updated on market news, price movement, and basis change each day.
4: They review the markets early each morning.
5: They make decisions early in the day before the market opens.
6: They think through their marketing plan.
7: They don’t panic when they hear negative news during the day.
8: They have a positive attitude about farming.
9: They have a positive attitude about marketing.
10: They consider marketing an exciting challenge, like a game they can learn and tackle.