DEVELOPING A MARKETING PLAN

What is the basic information you need to develop a marketing plan? l Determine the amounts of grain to sell l Determine the marketing tools you want to use l Determine when to sell l Form a realistic price goal

When should I Sell? l We have two years to sell a crop. Expand your window Spread your risk Sell in smaller increments l Recently best prices have occurred in fall prior to planting.

l Storage Season manage inventory--basis maximize returns to storage l Planning Season winter months l Selling Season Months of Mar. Apr. May and June SELLING SEASONS ACCORDING TO ROACH

Corn Prices--Normal Seasonal Pattern

Soybean Normal Seasonal Pattern

l Pre-Plant Recommended 10 to 20% of Crop l Growing Recommended 10 to 20% of Crop summer weather market l Harvest Recommended 10 to 20% of Crop l Storage SELLING SEASONS BY COUNTRY HEDGING

Deadlines l March 31 for pre-plant season Planting intentions report l June 30 for growing season Crop size generally known l Same dates apply for stored crop--all sold by June 30 l YOU MUST SELL BY YOUR DEADLINE

December Corn Seasonal

December 1998 Corn chart Planting Intentions Report Crop Estimate Report

November Soybean Seasonal

November Soybean Chart Planting Intentions Report Crop Estimate Report

What tools do I use? l Cash Sales l Forward Cash Contracts l Basis Fixing Contracts l Hedge-to-Arrive l Minimum Price Contracts Elevator or grain merchant

What tools do I use? l Sell Futures Contracts l Buy Put Options Fence l Buy Futures Contracts l Buy Call Options Sell and buy a call l Combinations with Cash Futures and Options

How well equipped is your tool box? l The more tools available the easier it is to meet your marketing goals l The added tools give you added flexibility l Learn about the tools and how they work

Picking the Proper Marketing Tool

Basis your market indicator l Know what the normal basis is Know the seasonal patterns l Tells us what tools to use l Tells us if it will be profitable to store l Can be used to time sales l Used to indicate market conditions

CORN BASIS

SOYBEAN BASIS

REALISTIC PRICE GOALS l Start with your cost of production plus a profit l Look to USDA projections l Look at Carry Over numbers and % of annual needs l Look at retracements l look at market newsletter projections for various crop sizes

USDA Price Outlook USDA Price outlook

Carry Over as % of Usage for Corn

Carry Over as % of Usage for Soybeans

Supply Estimates

Retracements Difference between high and low =$ /3 Retracement (.941 / 3) +$1.854)= 1/2 Retracement (.941 /2) + $1.854)= 2/3 Retracement (.941 /3) X 2) +$1.854)= $2.17 $2.32 $2.48

Your Home Work l Think about how much crop you want to sell in each marketing season l Figure out what marketing tools you like to use l Read market newsletters and other information--Price outlook l Be ready to write your marketing plan during the next class session