Creating and implementing a successful marketing strategy takes many different business and analytical skills. Before you even talk about marketing, you need to have the business and management skills to grow the crop as a low-cost producer.
For marketing, important factors that determine success are trend analysis, merchandising and basis analysis, and, occasionally, luck.
Another important factor is attitude. Producers who like marketing and view it as just another challenge will do better than those who dislike it and think the market is stacked against them.
Corn, soybean and cotton production margins are tight right now. That can lead to frustration and emotional marketing decisions.
Family marketing meetings or meetings with lenders to discuss marketing plans can be white-knuckle gatherings. If you want to improve your marketing, here are five suggestions.
Schedule regular marketing meetings. If you do not plan, your plan will fail. Farms without regular marketing meetings survive through crisis management. That means marketing is only discussed after prices have plunged lower — and/or a major payment is due. Weekly meetings should have agendas followed by action plans of who is going to do what.
Write down what worked and didn't work last year. Every year is different, but many successful families seem to employ strategies and alternatives that work well for their farms each year. One old business rule: If something works, keep using it until it stops working.
Usually, farmers who struggle with marketing have too much inventory and short-term debt.
Put goals in writing and greatly increase the chances that they will be more than wishes.
Goals will vary with the type of farm. Grain farms approach marketing differently from livestock or seed farms. Also, your goals may change year to year.
Pick reasonable goals, such as beating the local average cash price or forward selling enough that you won't have to pay elevator storage. Another goal would be to sell enough ahead to have the operating note paid off every year on the first business day of January.
Make marketing a team effort, or at least decide who is going to make the marketing decisions. A team effort works only when everyone plays well together. No Monday-morning quarterbacking is allowed.
Many farms choose to delegate some or all of the decisions to a qualified advisor in order to diversify and spread risks. By hiring an advisor to make marketing decisions on part of your crop, you can focus more time on maximizing yields.
Talk positively about marketing and odds are good that the younger generation you farm with will be more interested in farming. Producers who complain about low prices and lack of profitability should not be surprised when their sons and daughters choose to find other occupations.
A profitable farm run by positive managers will likely result in second, third and fourth generations of career farmers.
Back to strategy. When and at what price level should I be selling old-crop and new-crop soybeans?
For old crop, hopefully your cash sales are at 75% or more. If not, use any late-April or early May rally to get there. The seasonal pattern suggests that if prices rally into early May, it's time to get aggressive with old-crop sales. If prices collapse into early May, get ready for a return rally into early July.
For new crop? It's a long ways away and I wouldn't be interested in making new-crop sales until you can lock in a price that's equal to your county loan price.
For those interested, the first 100 farmers who e-mail email@example.com will receive the NorthStar Position For Profit video and workbook at no charge.
Alan Kluis is executive vice president of NorthStar Commodity Investment Co. If you have marketing questions or want more information, write: NorthStar, 1000 Piper Jaffray Plaza, 444 Cedar Ave., St. Paul, MN 55101; call: 800-345-7692 or e-mail: firstname.lastname@example.org.