1. Econ 339X, Spring 2010 ECON 339X: Agricultural Marketing Chad Hart Assistant Professor/Grain Markets Specialist chart@iastate.edu 515-294-9911

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

3. 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

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

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

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

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

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

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

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

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

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

13. Econ 339X, Spring 2010 Ammonia Prices Source: http://www.fertilizerworks.com/html/market/ TheMarket.pdf

14. 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.

15. 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

16. 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

17. 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?

18. 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

19. 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

20. Econ 339X, Spring 2010 Seasonal Pricing Patterns Source: USDA, NASS, Monthly Price Data 1980-2008

21. Econ 339X, Spring 2010

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

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

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

25. 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: http://extension.missouri.edu/explore/agguides/agecon/g00600.htm Purdue University: http://www.agecon.purdue.edu/extension/sbpcp/resources/mrktplan.xls AgRisk website: http://www.agrisk.umn.edu/library1/a0000037.pdf

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

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

28. Econ 339X, Spring 2010 Class web site: http://www.econ.iastate.edu/classes/econ339/hart- lawrence/ http://www.econ.iastate.edu/classes/econ339/hart- lawrence/