1. Bret Oelke - Farm Management Coach
Creating a Competitive Advantage with Improved Management and Marketing
Bret Oelke - Farm Management Coach

2. Innovus Agra, LLC We are: Mission: Farm management coaches
“To search for and develop opportunities that allow our customers to achieve their goals”

3. Objectives
Identify management activities that can improve profitability
Overview of current market
Review strategies that can help achieve or maintain profitability

4. Areas of Farm Management
FOR THE FEW, NOT THE MANY. NO DILLY DILLY
Production Management
Financial and Business Management
Risk and Margin Management
Some management tasks fall into more than one category

5. High Value Management Activities
Cost management
Production and business management
Efficiency improvement
Business management
Revenue management
Risk and margin management

6. Production Management
Be an outstanding producer of what you grow
Become an elite grower
Average
Above average
Elite growers

7. Cost Management Costs (expenses) Overhead Operational
Buildings, storage, P&C and liability insurance, utilities, professional (consultants, advisors)
What can be done here?
Operational
Machinery, labor, crop and livestock inputs

8. Cost Management Costs (expenses) Operational
Machinery, labor, crop and livestock inputs
What can be done here?
Buy better (be opportunistic), maximize input discounts
Minimize transaction costs, extract costs from the value chain

9. Cost Management What other factors are involved?
Input purchasing decisions
Product types and rates
Bundling or not bundling
Impact and cost of “timeliness'”

10. Efficiency Improvement
“Right sizing”
Are you fully utilizing your machinery and labor resources?
How can we improve in this area?
What can I outsource?

11. Efficiency Improvement
If you are not currently “right sized” it will be a difficult journey to get there
Optimal use of available labor, machinery and overhead
Scale, unit size, crops (livestock) grown, geographic footprint

12. Planning
If you do a good job of planning and utilizing planning tools, you can make better decisions in a shorter period of time
“It is not the big fish that eats the small fish, it is the fast fish that eats the slow fish”

13. Planning Develop crop and livestock production budgets
Make them interactive so you can quickly do “what if” scenarios
Have risk and margin management plans in place in order to take advantage of profitable opportunities

14. Risk and Margin Management
Cash, cash forward and HTA (traditional) grain marketers are at a significant competitive disadvantage
Understand how you can use all of the tools available to improve revenue
REQUIRES CAPITAL (refer to financial management)

15. Current Marketing Situation – Spring Wheat

16. Current Marketing Situation – Spring Wheat
December 2019 MGEX Wheat chart
Well below cost of production
Quality issues in some cases with falling numbers problems in later harvested wheat
Poor exports due to trade issues and a strong US dollar

17. Current Marketing Situation – Spring Wheat
Strategies
Sell poor quality wheat, store good quality wheat if possible
Buy March 2020 futures and set sell targets

18. Current Marketing Situation – Spring Wheat
Retracements
1/3 = $5.58
½ = $5.87
2/3 = $6.14
Full = $6.73
How achievable are these targets?
It depends on quality wheat supplies, value of dollar, soybean and corn price movement

19. Current Marketing Situation – Soybean

20. Current Marketing Situation – Soybean
We have not gotten a technical buy signal at this point in time
We should all be aware of potentially poor soybean yields nationwide
As of last week we had 10.4 million acres that had not flowered yet
Very late planting

21. Current Marketing Situation – Soybean
Strategies
Sell poor quality soybeans
Store old and new crop leftovers if possible
Buy January or March futures when we get a buy signal (or ramp into buying if you believe early harvest will result in a rally)
Sell in increments at pre-specified targets

22. Current Marketing Situation – Corn

23. Current Marketing Situation – Corn
Near normal trading range for December corn
Watch the gap (sell?) Set price targets and be aware of basis opportunities
Yields and harvested acres are very much uncertain at this point
Poorest crop conditions since 2011, 2012, 2013 average yields those 3 years = 143
Very late planting

24. Risk and Margin Management
Understand and utilize all of the tools available to manage price risk and to extract as much as you can (while taking calculated risks) from the market place
Become a better than above average price risk manager

25. Risk Management, Margin Management, Marketing Plan
How many of you have a WRITTEN marketing plan for old crop and new crop production?
IF you do NOT, how do you make decisions on when to market?
Lenders, how many of you REQUIRE your customers to present a written marketing plan along with their other financial documents?

26. Types of Risk Management (Marketing) Plans
Inactive
Reactive
Overactive
Proactive

27. Types of Risk Management (Marketing) Plans
Inactive
This is a completely emotion driven lack of a plan
Greed, Fear, Frustration,
Very difficult to explain to providers of capital
From late 2006 until the middle of 2014 this worked just fine
If this is your strategy today your business is at risk

28. Types of Risk Management (Marketing) Plans
Reactive
There is still some emotion involved in this type of marketing
Generally the reactive marketers react to negative situations and miss some of the positive
We utilize some reactive components in our proactive plans (more on this later)

29. Types of Risk Management (Marketing) Plans
Overactive
In and out of futures positions
More of a trader, less of a hedger
7 brokerage accounts?

30. Types of Risk Management (Marketing) Plans
Proactive Risk Management Plans
Helps remove some of the emotion in managing price risk
Allows providers of capital to have more confidence in your business probability of success
Is easier to implement because a decision making process is in place prior to price movement that can cloud judgement

31. A Proactive Risk Management Plan
Action Steps
Know your cost of production of the crop(s) that you will be marketing
Decide which price risk management tools you are willing to use in your plans
Understand seasonality in futures prices and in basis
Set price targets that take into consideration your costs and expected market prices
Build in some flexibility in order to allow for some upside price movement

32. A Proactive Risk Management Plan
Action Steps
Plans must be written and shared in order to assure implementation
Make sure there is adequate capital available in order to implement the plans
EXECUTE THE PLAN

33. A Proactive Risk Management Plan
Price Increments – Survey the landscape, what are your expectations
Price Targets – How do you arrive at these?
Decision Dates – Reports, crop insurance, futures seasonality
Minimum Price – Your cost of production
Tools Utilized – Exchange based and buyer contracts

34. A Proactive Risk Management Plan
Adequate risk management capital is required to fully implement your risk management plans
We operate in a three crop year at a time risk management time frame – Old crop (2019) New crop (2020) New crop (2021)
In most cases we rely heavily on end user contract for old crop and the current year new crop but use futures contracts exclusively when hedging a year or more ahead.
We encourage growers to separate production and risk management capital

35. A Proactive Risk Management Plan
Please remember that all of these plans should be actively managed, constantly reviewed, modified and improved upon in order for you to meet your risk management and business management goals
Risk management (as well as production and business management) are team activities! Make sure you build a great team!

36. Bringing It All Together
What are you willing to do (change) to achieve or maintain success?
Be a planner –
Operational plans; production plans; financial plans; risk management (marketing) plans

37. Bringing It All Together
Innovation does not come from a place of comfort
Calculate, critically think and communicate
Flexibility, speed and process now trumps scale – still need to be operationally efficient, scale still needs to be balanced, and your operation needs to be right sized

38. Bringing It All Together
Understand your financial strengths and weaknesses, continually drive for improved efficiency, benchmark, compare, and improve
Develop a long term vision, look forward for opportunities

39. Thank You!
Please thank the sponsors for this professional development opportunity!
Bret Oelke – Innovus Agra, LLC