Taming the Bulls and Bears

Seven Steps to a Simple Marketing Plan Tailored to Your Farm

By Betsy Jensen
Ag Commodity Instructor, Northland Community and Technical College, bjensen@nctc.mnscu.edu

Marketing plans are the greatest thing since sliced bread—or so you may have heard.  You may have attended seminars on how to put together marketing plans, and returned home determined to write an excellent plan, with price and time deadlines, technical indicators, call and put options, and other strategies.  Then, when your plan begins to resemble War and Peace, you give up on it because it’s too long and complicated.

And you think to yourself, “there’s got to be a better way.”

Keep in mind that you cannot use a generic marketing plan. Each farm should have a marketing plan that is unique to it, depending on cash flow needs, risk tolerance, and how much grain is still in the bin from last year.  Here’s a few tips to help your operation create a marketing plan that’s tailored for you.

1. Write a marketing plan for a portion of your crop. Instead of writing a marketing plan for 100% of your crop, write a marketing plan for 50% of your crop, and don’t even worry about the second half. It’s easier to follow a marketing plan if you know you still have 50% of your crop to sell later on.  Many of us follow through on the first few sales of our marketing plan, and forget about the later sales.  Instead of making yourself feel bad, don’t even write a marketing plan for the second half. Worry about that later, hopefully when wheat is $6 and beans are $10.  Take little steps instead of one giant step. 

2. Try to increase your amounts sold when price targets are met.  Sell 5% on your first sale, 10% on the next, 15% on the next, etc. Each sale should become easier since prices are going higher, and with higher prices, sell higher amounts.

3. Define your top and bottom price targets.  Once you’ve decided how much grain to include in your marketing plan, put a low price on the top of the sheet of paper, and a high price at the bottom.  For example, you may want a first wheat sale at $3.75 and a top sale at $4.50.  Then fill in between with the rest of your bushels.

4. Decide on your time deadlines. Even after the big rally of 2002, I’m still a believer in making spring sales. Develop your own time deadlines, and as far as I know, luck is still a major component in picking the right day during the spring.  Ask your spouse, neighbor or kids to pick a day to sell in May, if your price targets haven’t already been hit.  Their guess is as good as yours, and I bet they won’t let you forget the deadline. (Hint: This may also be a good way to remember special dates such as birthdays, anniversaries, Mother’s Day, etc.) 

5. Pick a bare minimum price. The bare minimum price should be no lower than the loan rate, a lesson many farmers learned last year when they contracted soybeans below the loan rate. If prices are below your bare minimum, you will not sell, even if your time deadlines are hit.

6. Decide what role options will play in your marketing plan. The last thing I want farmers doing is getting caught up in a bull market, buying call options instead of making grain sales. If you don’t want to buy call options, write that down today. If you want to purchase put options at a certain point, write that down as well. It might look something like this: If I can lock in $4 futures with a put option, I will do that on 100% of my crop. That might mean a $4.20 put for $.20.

7. Is the concept of writing a “marketing plan” too daunting? Then call it something else, like Betsy’s Grain Selling plan (maybe you want to use your own name, however) or your marketing resolution worksheet. Here’s an example:

Chester White’s Marketing Resolutions for 2003
I estimate I’ll grow 50,000 bushels of wheat, but right now I am only going to worry about selling 20,000 bushels, or about 40% of my new crop.

•  Sell 5,000 bu at $3.78 futures, deadline April 16

•  Sell 5,000 bu at $3.97 futures, deadline May 16

•  Sell 10,000 bu at $4.23 futures, deadline June 6

I will purchase put options on 100% of my unsold crop, if at any time during the year I can lock in $4 futures.

I’m giving myself permission to reown the last 25% that I sell with call options, but only the last 25% and only if it’s sold, and not a day before. 

There. Not so hard, is it?  The key to writing your marketing plan is to make it executable.  Don’t make it too confusing, too complicated, too long, or too intimidating.

Jensen farms with her husband Brian near Stephen, Minn.  Her market education activities including this column are supported in part by the Minnesota wheat checkoff, directed by the Minnesota Wheat Research and Promotion Council. If you have a question or topic related to marketing that you’d like to see addressed in this feature, call 1-800-242-6118, or email Jensen: bjensen@nctc.mnscu.edu.