1. Econ 339X, Spring 2011 ECON 339X: Agricultural Marketing Chad Hart Assistant Professor chart@iastate.edu 515-294-9911 John Lawrence Professor jdlaw@iastate.edu 515-294-7801

2. Econ 339X, Spring 2011 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

3. Econ 339X, Spring 2011 Greed Fear Ego

4. Econ 339X, Spring 2011 Changes in Price Volatility Source: Zulauf and Roberts, Ohio State

5. Econ 339X, Spring 2011 Historical Soybean Volatility Changes Source: Zulauf and Roberts, Ohio State

6. Econ 339X, Spring 2011 Factors Leading to Higher Commodity Prices Source: USDA-ERS, Trostle, July 2008

7. Econ 339X, Spring 2011 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.

8. Econ 339X, Spring 2011 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

9. Econ 339X, Spring 2011 Building a Marketing Plan 5 basic steps:  Estimate number of bushels/animals to sell  Calculate breakeven price  Project price and production scenarios  Compare pricing tools and analyze market opportunities  Develop a pricing plan

10. Econ 339X, Spring 2011 Bushels/Animals 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?

11. Econ 339X, Spring 2011 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

12. Econ 339X, Spring 2011 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

13. Econ 339X, Spring 2011 Seasonal Pricing Patterns Source: USDA, NASS, Monthly Price Data 1980-2008

14. Econ 339X, Spring 2011 Source: Ed Usset University of Minnesota, CFFM

15. Econ 339X, Spring 2011 Source: Ed Usset University of Minnesota, CFFM

16. Econ 339X, Spring 2011 Source: Ed Usset University of Minnesota, CFFM

17. Econ 339X, Spring 2011 Another Template Source: O’Brien, Grain Marketing Plans for Farmers, Kansas State University, July 2000

18. Econ 339X, Spring 2011 Another Template Source: O’Brien, Grain Marketing Plans for Farmers, Kansas State University, July 2000

19. Econ 339X, Spring 2011 Another Template Source: O’Brien, Grain Marketing Plans for Farmers, Kansas State University, July 2000

20. Econ 339X, Spring 2011 More Examples University of Nebraska: “Achieving Success with a Business Plan: Case Study to Prepare a Grain Farm Business Plan” (CC424) University of Missouri: http://extension.missouri.edu/publications/DisplayPub.aspx?P=G600 Purdue University: http://www.agecon.purdue.edu/extension/sbpcp/resources/mrktplan.xls AgRisk website: http://www.agrisk.umn.edu/library1/a0000037.pdf Iowa State University: “Mapping the Route to Better Prices: Developing a Marketing Plan” - Available on the class website

21. Econ 339X, Spring 2011 Decision Trees Source: Usset, U. of Minnesota

22. Econ 339X, Spring 2011 Decision Trees Source: Wisner, Iowa State University

23. Econ 339X, Spring 2011 Class web site: http://www.econ.iastate.edu/~chart/Classes/econ339/ Spring2011/