Econ 339X, Spring 2010 ECON 339X: Agricultural Marketing Chad Hart Assistant Professor/Grain Markets Specialist

Econ 339X, Spring 2010 Today’s Topic Marketing Plans

Econ 339X, Spring 2010 Fear, Greed, and Ego Fear of making a bad decision -- Watching prices slip away as you wait Greed of expecting even higher prices -- Not taking advantage of good price opportunities Ego of wanting to claim you caught the market high -- “Lake Wobegon” marketing

Econ 339X, Spring 2010 Greed Fear Ego New generation contracts are one way to remove emotion from marketing

Econ 339X, Spring 2010 Changes in Price Volatility Source: Zulauf and Roberts, Ohio State

Econ 339X, Spring 2010 Historical Soybean Volatility Changes Source: Zulauf and Roberts, Ohio State

Econ 339X, Spring 2010 Overall Shift Source: Zulauf and Roberts, Ohio State

Econ 339X, Spring 2010 Source: Zulauf and Roberts, Ohio State

Econ 339X, Spring 2010 Source: Zulauf and Roberts, Ohio State

Econ 339X, Spring 2010 Source: Zulauf and Roberts, Ohio State

Econ 339X, Spring 2010 Source: Zulauf and Roberts, Ohio State

Econ 339X, Spring 2010 Factors Leading to Higher Commodity Prices Source: USDA-ERS, Trostle, July 2008

Econ 339X, Spring 2010 Ammonia Prices Source: TheMarket.pdf

Econ 339X, Spring 2010 Marketing Plan To avoid fear, greed, and ego dominating your marketing, have a plan and stick to it. A marketing plan outlines your market strategy and your marketing objectives. It should examine marketing opportunities before and after harvest.

Econ 339X, Spring 2010 Marketing Objectives  Get the highest selling price  Pretty tough to do  More realistic objective: Obtain better than average prices  Reduce price risk  Cover cash flow needs  Minimize tax liability Look at short and long-term goals for your business

Econ 339X, Spring 2010 Building a Marketing Plan 5 basic steps:  Estimate number of bushels to sell  Calculate breakeven price  Project price and yield scenarios  Compare pricing tools and analyze market opportunities  Develop a pricing plan

Econ 339X, Spring 2010 Bushels to Sell  What’s your expected production?  What do you have in storage?  What about on-farm use? Breakeven Costs  What are your production costs?  What are your storage costs?  On-farm vs. off-farm?  What are your cash flow needs?

Econ 339X, Spring 2010 Scenarios  Seasonal price trends  Weather outlook  Export picture  Livestock outlook Tools and Opportunities  Market tools: Futures, options, forward contracts  Government tools: Crop insurance, marketing loans, CCP/ACRE

Econ 339X, Spring 2010 Tentative Pricing Plan  Outline realistic pricing targets  Have periodic price targets and quantities to sell  Have patience and be willing to reevaluate price goals  Remember it’s hard to lose money when making a profit

Econ 339X, Spring 2010 Seasonal Pricing Patterns Source: USDA, NASS, Monthly Price Data

Econ 339X, Spring 2010

Another Template Source: O’Brien, Grain Marketing Plans for Farmers, Kansas State University, July 2000

Econ 339X, Spring 2010 Another Template Source: O’Brien, Grain Marketing Plans for Farmers, Kansas State University, July 2000

Econ 339X, Spring 2010 Another Template Source: O’Brien, Grain Marketing Plans for Farmers, Kansas State University, July 2000

Econ 339X, Spring 2010 Some Examples University of Nebraska: “Achieving Success with a Business Plan: Case Study to Prepare a Grain Farm Business Plan (CC424) University of Missouri: Purdue University: AgRisk website:

Econ 339X, Spring 2010 Decision Trees Source: Usset, U. of Minnesota

Econ 339X, Spring 2010 Decision Trees Source: Wisner, Iowa State University

Econ 339X, Spring 2010 Class web site: lawrence/ lawrence/