Lender’s View of an Astute Marketer: Part III

Let’s conclude this series of articles on marketing from a lender’s point of view. In previous articles we discussed knowing cost of production, breakevens, discipline and action or delegated action. Now let’s end with some final points.

Profit Margin
Next, a producer who is an astute marketer knows the bottom line profit margin. They know the cost of inputs and balance it with cost of outputs to devise a plan that provides a reasonable margin given the business goals and objectives of the producer.

Resource Manager
The astute marketer is a resource manager who manages land, labor, capital and information effectively. They know their debt position, and have the ability to handle risk with the debt load while keeping opportunity cost objectives of equity capital in mind. In some cases they will use crop insurance and other risk mitigation tools to provide balance to the marketing plan.

Thinks Globally and Acts Locally
Finally the astute marketer thinks globally but acts locally. Yes, it has been dry in northern Illinois this summer, but there are other regions of the world that can step to the plate and make up for the production.

The astute marketer monitors the market from a global standpoint but executes and monitors results locally on the income statement and balance sheet.

Viewpoint
Here are some characteristics of the ideal marketing plan that an agrilender would like to see:

    Written
  • Objectively based
  • No margin calls
  • Not based upon market predictions
  • Focused on price protection
The best marketers have no idea where the market is headed, but every idea of what they can handle based upon goals and financial cost. They also place a high priority on marketing.

My e-mail address is: sullylab@vt.edu

Editors' note: Dave Kohl, The Corn and Soybean Digest Trends Editor, is an ag economist specializing in business management and ag finance. He recently retired from Virginia Tech, but continues to conduct applied research and travel extensively in the U.S. and Canada, teaching ag and banking seminars and speaking to producer and agribusiness groups.

To see Dave Kohl's previous road warrior adventures type Dave Kohl in the Search blank at the top of the page.

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