Agriculture Marketing Marketing Plans

Agriculture Marketing “The process of making decisions about selling or pricing farm products for current or future delivery”

Situation: You have 10,000 bushels of corn in storage to sell over the next 12 months Rules Rules Must be sold in 1000 bushel increments Must be sold in 1000 bushel increments You need to charge yourself 3 cents per month for storage and interest costs You need to charge yourself 3 cents per month for storage and interest costs

Greed-Hope-Fear School of Marketing

“2/3 of the farmers sell their grain in the bottom 1/3 of the market”

Costs of Storing Corn Worksheet: Cost of Storing Grain Worksheet: Cost of Storing Grain File A2-33 File A m/crops/ta/a2-33ta.doc m/crops/ta/a2-33ta.doc Excel Worksheet Excel Worksheet m/crops/xls/a2-33.xls m/crops/xls/a2-33.xls

Top Ten Mistakes Made in Marketing 1.Not starting early enough. 2.Expectations governed by wants not realism. 3.Being influenced by rumors (coffee talk). 4.Poor evaluation of price and production risk. 5.Treating storage as a savings account.

Top Ten Mistakes Made in Marketing (continued) 6.Storing in short crop years. 7.Ignoring cash-flow needs. 8.Not using seasonal price patterns. 9.Lack of marketing discipline. 10.Not looking at all alternatives.

So what’s a Marketing Plan?

Marketing Plan: A scheme on how farm production will be priced. A scheme on how farm production will be priced. It indicates the price level and time period in which your agriculture commodities will be priced. It indicates the price level and time period in which your agriculture commodities will be priced.

Marketing Plan (continued) It can determine when and how much income will be needed by the farm business during the upcoming period. It can determine when and how much income will be needed by the farm business during the upcoming period.

Marketing Plan (continued) It provides a farmer with a plan that can be followed or modified during the year in order to better meet his/her needs. It provides a farmer with a plan that can be followed or modified during the year in order to better meet his/her needs.

Step One of a Marketing Plan Set realistic business and family goals Set realistic business and family goals Place a Dollar figure on family goals Place a Dollar figure on family goals Place a Dollar figure on business goals Place a Dollar figure on business goals Quantify it by year Quantify it by year

Step Two of a Marketing Plan Financial Planning Financial Planning (i.e. Cash Flow) (i.e. Cash Flow) How much money will you need and when will you need it? How much money will you need and when will you need it?

Step Three of a Marketing Plan Know your costs of production Know your costs of production Breakeven Price Breakeven Price The market price at which you don’t make any money but also do not loose any money The market price at which you don’t make any money but also do not loose any money

Step Three of a Marketing Plan Worksheet: Crop Decisions Worksheet: Crop Decisions File A3-10 and A1-20 File A3-10 and A1-20 Custom Rate Survey Custom Rate Survey Excel Worksheets Excel Worksheets

Step Three of a Marketing Plan Worksheet: Livestock Enterprise Budgets Worksheet: Livestock Enterprise Budgets File B1-21 File B

Step Four of a Marketing Plan Know current market factors and price trends Know current market factors and price trends

Step Five of a Marketing Plan Set Target Prices Set Target Prices $ Business Goals $ + $ Family Goals $ + $ Breakeven Price $

Step Six of a Marketing Plan Evaluate Production and Marketing Alternatives Evaluate Production and Marketing Alternatives Is your target price achievable? Is your target price achievable? Can it be made achievable? Can it be made achievable? What are your alternatives? What are your alternatives?

Marketing Plan Assignment Introduction Introduction Week 1 Week 1

Step Seven of a Marketing Plan Develop a marketing strategy that will meet your target price and cash flow needs Develop a marketing strategy that will meet your target price and cash flow needs

Decision Rules Triggers Triggers Indicate that a decision is needed Indicate that a decision is needed Actions Actions Decision to implement Decision to implement Example Example Hedge 50% (action) if futures fall below $2.10 (trigger) Hedge 50% (action) if futures fall below $2.10 (trigger)

Sample marketing plan November: Hedge 20% of production for next 6 months if over target price. Hedge 40% if prices are 20% over target price. November: Hedge 20% of production for next 6 months if over target price. Hedge 40% if prices are 20% over target price. December: Hedge an additional 10% of production for next 6 months if over target price. Hedge additional 20% if prices are 20% over target price. December: Hedge an additional 10% of production for next 6 months if over target price. Hedge additional 20% if prices are 20% over target price. January: Hedge an additional 10% of production for next 6 months if over target price. Hedge additional 20% if prices are 20% over target price. January: Hedge an additional 10% of production for next 6 months if over target price. Hedge additional 20% if prices are 20% over target price.

Sample marketing plan February: Sell $40,000 for cash if not already done so. Hedge an additional 10% of production for next 6 months if over target price. February: Sell $40,000 for cash if not already done so. Hedge an additional 10% of production for next 6 months if over target price. March: Hedge an additional 10% of production for next 6 months if over target price. Hedge additional 20% if prices are 20% over target price. March: Hedge an additional 10% of production for next 6 months if over target price. Hedge additional 20% if prices are 20% over target price. April: Sell $50,000 to meet crop expenses if not already done so. Hedge an additional 10% of production for next 6 months if over target price. April: Sell $50,000 to meet crop expenses if not already done so. Hedge an additional 10% of production for next 6 months if over target price.

Step Eight of a Marketing Plan Modify your marketing plan as necessary to keep current. Modify your marketing plan as necessary to keep current.

Video: Reasonable Risks

Possible Marketing Objectives Selling at the highest price Selling at the highest price Selling above the average price Selling above the average price Selling above the midpoint Selling above the midpoint Making a profit Making a profit Selling to meet cash flow Selling to meet cash flow Minimizing risk Minimizing risk

Quiz (T, F) In developing a marketing plan, one should project the highest prices for the year. (T, F) In developing a marketing plan, one should project the highest prices for the year. (T, F) Developing a marketing plan can reduce price risk. (T, F) Developing a marketing plan can reduce price risk. (T, F) A marketing plan involves determining storage facility needs (T, F) A marketing plan involves determining storage facility needs

Quiz (T, F) Family goals should be included in a marketing plan. (T, F) Family goals should be included in a marketing plan. (T, F) A producer should calculate the money lost by not selling at the highest price. (T, F) A producer should calculate the money lost by not selling at the highest price. (T, F) A marketing plan will help keep emotions out of marketing decisions. (T, F) A marketing plan will help keep emotions out of marketing decisions.

Quiz (T, F) A marketing plan is useful in tax management. (T, F) A marketing plan is useful in tax management. (T, F) The producer should make marketing a major business activity. (T, F) The producer should make marketing a major business activity. (T, F) A marketing plan allows a producer few alternatives once it is implemented. (T, F) A marketing plan allows a producer few alternatives once it is implemented.

Marketing Plan Assignment Week 2 Week 2

Sample marketing plan November: Hedge 20% of production for next 6 months if over target price. Hedge 40% if prices are 20% over target price. November: Hedge 20% of production for next 6 months if over target price. Hedge 40% if prices are 20% over target price. December: Hedge an additional 10% of production for next 6 months if over target price. Hedge additional 20% if prices are 20% over target price. December: Hedge an additional 10% of production for next 6 months if over target price. Hedge additional 20% if prices are 20% over target price. January: Hedge an additional 10% of production for next 6 months if over target price. Hedge additional 20% if prices are 20% over target price. January: Hedge an additional 10% of production for next 6 months if over target price. Hedge additional 20% if prices are 20% over target price.