Taming the Bulls and Bears

Oh Those Darn Marketing Plans -

Perhaps it should be renamed “Profitability Plan.”  If the plan is a map to profitability, then it is much easier to follow.

Oh those darn marketing plans. They can take the fun out of every rally.  Whenever anything rallies, my neighbors are talking about how much higher prices are going to go, and I look at my plan and think “Was I really supposed to sell here?”  I must have written that plan when I had the flu and was on some strong narcotics.  Did I really think this was a good place to make a sale? Everyone else is bullish, and everyone else is always correct, right?

Marketing plans are scary. Putting anything down on paper means it can come back to haunt you at some point.  Worse, it makes you accountable.  So how can you possibly write a marketing plan, and how can it work for you?

It’s important to remember that a marketing plan is not written in stone.  You can certainly make changes to it.  You cannot change your first sale, and I also recommend not changing the second sale, but you bet you can change it throughout the year. Many soybean marketing plans were changed in the spring of 2004 because prices blew right through most sales targets. It’s unrealistic to sell all of your production before you even plant the crop.  We had to make some changes to the plans because the market had changed. That’s perfectly fine. It’s your plan, do what you want with it.

You also don’t have to wait to make sales, just because your plan price has not been hit.  Too often farmers hold out for a few more pennies, and end up losing $.50.  If you want to sell wheat at $4.00, but wheat keeps hovering around $3.95, for crying out loud, just make the sale. Holding out for that last nickel could end up causing more harm than good. Look at the risk to reward ratio:  I’m holding out for a nickel but I’m risking $.50.  That last nickel might not be worth it.

When you write your marketing plan, you should be taking into account your cost of production. Now everyone has a different cost of production to consider. You might need $3.50 wheat to cover your direct costs like fertilizer and seed and I call this the survival price.  You can survive, but you certainly won’t thrive.  You might need $3.75 if you want to make the payment for the tractor you bought last year, and you might need $4 if you want to have something extra to put in your pocket, and maybe buy a new air seeder to go behind that new tractor. 

If you can survive at $3.50, it’s not a bad place to begin making sales. If you can sell some crop at $4, you know you’ll make a profit. Your marketing plan could be renamed a “Profitability Plan.”  If the plan is a map to profitability, then it is much easier to follow. 

Regardless of what kind of marketing plan you develop, just make sure it’s your idea. Many farmers ask me for my marketing plans, but I’m often reluctant to share.  I don’t want each of you using my marketing plan, because we don’t share the same cost of production or the same risk tolerance. You can use my marketing plan to get some ideas to develop your own plan, but I recommend modifying it for your own operation. 

It’s not going to do any good to develop a marketing plan that will just scare you, and paralyze you when the market rallies. All markets do rally at some time, and the purpose of a marketing plan is to help you stay calm and make sales.  If your marketing plan doesn’t do that, then you need a new plan.

Jensen puts her marketing plan to work farming with 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:  betsy.jensen@northlandcollege.edu.

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Changing Your Marketing Plan Without Scrapping It

Since market conditions (or your production situation) can change rapidly in unexpected directions, your marketing plan (or if you want to get more descriptive, “selling plan”) should be evaluated and modified periodically. And if adjustments aren’t made, you might end up with strategies in your plan that are inappropriate for current trends or conditions.

If prices change, consider revising the quantity of incremental sales you have in your plan.  For example, if market dynamics turn bullish, change the amount of each sale from 1,000 bushels of wheat to 2,000 bushels at each price level. Or, change the price objective between each sale; say from 10 to 25 cents between each sale. Either way, your selling plan stays on track.

Re-evaluate your marketing plan when the market is volatile, or takes a different direction, and when there are changes or uncertainty in production or production conditions. Review your plan at least once a month (but no more than once a week), unless market conditions or changes in your individual situation dictate otherwise. – Mike Lockhart, a Ulen, Minn. farmer, marketing group coordinator, and instructor with the Northwest Minnesota Farm Business Management program coordinated by Northland Community and Technical College, based in Thief River Falls, Minn.