Marketing plans

[Jim Meade / Iowa City]

All of us have seen many marketing plans over the years.  Some rely on fundamentals.  Some on technicals.  Some feature selling at planting and buying back at harvest.  Some recommend selling incrementally over time, during both the planting and post-harvest periods.  Some call for price or time targets.  There are all kinds of plans.

I think in the last 5 years, many of them have not worked very well.  We have new players in the market (a fact that market analysts refuse to consider in how that might change conventional market planning.  For example, hedge funds work on their own timetable.  China imports based on it's own times and needs.  We also have new forces at work, such as the relative value of currencies and the variable demand for energy such that grain becomes an energy play.

The latest marketing plan I've been hearing put forward  is to sell when you can assure a profit.  Gone is the idea that you should worry about timing, you should focus on return.  What does this not do?  One thing it does not do is help you sell at a loss when that is the only alternative.  Timing and maybe even price targets will at least do that.  Another thing it does not do is help you maximize your price.  While your neighbor held out for and got $6 corn, you made a profit at and accepted $5.50.  At 200 bu/acre, you gave up $100/acre which your neighbor/competitor will be able to factor into rent offers.

;Selling when you make a profit as a marketing plan assumes you can predict or control inputs enough to know when you have passed the cut line.  Big farmers can control inputs better than small ones and thus have an advantage, especially in selling in the out years.  The big will get bigger and the small will perish or become a niche market.

It's hard at first glance to argue with the idea of selling when you can make a profit, but we can't  control some inputs such as land costs.  We can't send home a couple of hundred acres.  It's hard to tell a $300,000 combine that you will only pay for half of it because you let some land go.

Some say that volatility is our friend, but that it is not.  Farmers raise a commodity and need to work on the margin as much as possible.  Volatility increases risk but for most farmers doesn't increase opportunity.  It is not a marketing plan.

It is my impression that there are fewer reliable marketing plans now than ever before th futures markets opened.  That means the futures markets are no longer doing their job and I use them less and less.  I hate to become a reactionary who stores and waits, but that is getting to be the inclination.

[NDf]

Jim while I can understand your disillusions with the futures market and marketing plans, what I don't agree with is that anything you said is necessarily  new it's always been this way. There is no holy grail of marketing plans never has been some times they work great sometimes not you just have to find one that is right the majority of the time and be flexable enough to tweek it when the times change . Bigger operators have always had a advantage with economy of scale. Your neighbor could always sell at a higher price, but if he is arrogant enough to think that he can out market the rest of his neighbors every year sooner or later he could run into trouble.

[JRfrom OR]

I agree, especially with the part about selling at a profit.  The old saw about "you won't go broke selling at a profit" passed off as country wisdom doesn't cut it.  I also agree with your thoughts about the futures market. 

The producer is in a tough spot, one must be expert on the production side, and also on the marketing side, the side where opposite him at the table are conference rooms full of MBAs whose sole object in life is to take as much of his money as possible.  Good post.

[rightone]

that's right...when one has the spare loading / trucking help, when the weather cooperates etc..

Big believer in simply chopping say 5 to 10% of corn and WET harvest of another 5 to 10% early.

What the afore does is simply gets that "out of the way," before the rest of harvest. 

Can either be sold to a feeder or fed by your own operation..just depends on your area.

This year on corn...just keep on metering it out for cash monthly. 

These are good price levels on cash corn in the crumby basis areas so keep those trucks going all winter and be out of almost ALL the corn by planting time 011.

Beans....nother story.  70% of the new crop stored ( last 3 years one has been able to fish this market and move 30% off the combine in the $11 to $12 cash range ). 

Bullish beans thus figure in the $15 range cash say spring 011.

Generallly alot more opportunity for maximization of $ return by storing beans vs corn.

Storing corn at these levels is likely a WASTE of space, but then again, the fastest place to dump at harvest is ussually in your own on the farm storage ( assuming folks have their piles on the ground already hauled in ).

LOTTA corn piles in the Western states this year...and none of em are little piles either ( quite a few over 1/4 mile long ). 

[time:thetippingpoint]

We are using the futures market a lot less because

we can use much better tools from folks like Big C,

that are based on the futures market but with little

to no margin risk and income is received in the

correct tax year. Net effect is we are actually

using the futures markets a LOT more than we

used it before 2007.

Harvest the specs as somone likes to say is

good advice.

The winter high is close at hand, there are

many tactics to use to protect things. (buying

at the money options is not one of them in

our view btw) Obviously almost no one is

doing anything as volume

and OI is stagnant or declining.

just an opinion and worth no more

[Palouser]

All I can say is that compared to 5 years ago or so producer thinking has changed a lot. The trust in some of the methods and institutions that producers have relied on has declined - and I think for good reason. Whereas production technology has increased steadily, global marketing realities have exploded in importance, both in positive and negative ways for the producer.

I think the major change for many of us is that we now have a reliable stream of information that is very current compared to yesteryear. We are seeing an integrated world almost in real time. Before we relied on the picture painted or imagined for us. When things developed more slowly that might have been nearly adequate. Now we have to develop the skills to individually be responsible for putting together an accurate picture of what's happening globally and react to further or protect our interests. Luckily, this digitally based technology also allows us to compare our views with other producers who have the same goals as us, and maybe insights that we can share with each other to level the playing field in the global market place.

[dapper7]

time, how could you be using futures less and more in the same post? what did i miss here?d7