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Simplify Marketing
Strategies
by Ed Usset
Grain Marketing Specialist - University of Minnesota
We all need more simplicity in agriculture, and in life.
Especially when you look at the headlines of what happened recently on
Wall Street:- “U.S. Seizes Control of AIG with $85 Billion
Emergency Loan”
- “Wall Street Posts Worst Loss Since 2001”
- “Lehman Files for Bankruptcy; Merrill is Sold”
- “Wall Street Still Unnerved Despite Rescue of Big
Insurer”
In these times, now more than ever with these larger
financial issues going on around us, we need to stay focused on what’s
best for our operation. Corn is no longer being run by corn economics.
You must step away from the markets and do what’s right for your
business.
As University of Minnesota grain marketing specialist, I have spent more
time listening to growers than doling out an upcoming market outlook. I
do that because I think growers need to start their marketing with a
different approach – one that doesn’t begin with the market outlook.
Listening to producers, I have learned that very few had a plan to
improve their marketing results. So now I talk to them about minimizing
or eliminating mistakes made in grain marketing, which is one aspect I
write about in my book “Grain Marketing is
Simple”.
Read on to learn more about my simple approach…and there’s a video
at the end of this newsletter where I talk through this approach to
grain marketing.
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Have A Plan
I suggest a proactive strategy to price grain (sell it
once) that takes into consideration crop insurance coverage, anticipated
production, storage capabilities, etc.
Before harvest, the strategy is designed to capture early pricing
opportunities, with crop insurance and cost of production being critical
elements.
My postharvest marketing plan involves an exit strategy along with
considering such tactical matters as storage opportunities, carrying
charges, basis, LDP, the seasonality of cash and futures prices and your
appetite for risk.
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Find The
Dime
These three words comprise my mantra to producers. The
goal is to find the dime (or dimes) with a proactive approach to
marketing that seeks to minimize or eliminate mistakes.
I don’t play the game of market outlook and trying to be “right”
on the market.
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Know Your Cost Of
Production
In a commodity market, common sense says that the
low-cost producer wins.
That is exactly why knowing your cost of production is vital to your
marketing plan. It determines your competitive position and gives you a
starting point for your plan.
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Eliminate
Mistakes
Many producers make simple mistakes due to a lack of
understanding about the market, and each mistake can cut 10-20 cents or
more off your average selling price.
These five mistakes steal the most money from your
pocket:- Reluctance toward preharvest marketing
- Failure to understand and track your local basis
- Lack of an exit strategy
- Holding grain in storage too long
- Misunderstanding carrying charges: paper farming to avoid storage
costs?
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Listen To The
Market
I believe in tuning-out daily marketing chatter in
favor of paying more attention to what markets tell us through basis and
carrying charges.
Understanding a weak or strong basis is fundamental to select the best
pricing tool. Understanding carrying charges is critical to the decision
to store grain.
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Look
Ahead
Realize that not all pricing decisions are going to be
right.
Many advisors would have you re-buy and re-sell your grain in an attempt
to right your wrong decisions. I suggest accepting the wrong decision
and looking ahead to the future rather than spending time with old
decisions.
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