Transcript Marketing Plans - Iowa State University

ECON 339X:
Agricultural Marketing
Chad Hart
Assistant Professor
[email protected]
515-294-9911
Econ 339X, Spring 2011
John Lawrence
Professor
[email protected]
515-294-7801
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
Econ 339X, Spring 2011
Econ 339X, Spring 2011
3/3/2009
1/3/2009
11/3/2008
9/3/2008
7/3/2008
5/3/2008
3/3/2008
1/3/2008
11/3/2007
9/3/2007
7/3/2007
5/3/2007
3/3/2007
1/3/2007
$ per bushel
8
Ego
7
6
5
4
3
Changes in Price Volatility
Source: Zulauf and Roberts, Ohio State
Econ 339X, Spring 2011
Historical Soybean Volatility Changes
Source: Zulauf and Roberts, Ohio State
Econ 339X, Spring 2011
Factors Leading to Higher Commodity Prices
Econ 339X, Spring 2011
Source: USDA-ERS, Trostle, July 2008
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.
Econ 339X, Spring 2011
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
Econ 339X, Spring 2011
Building a Marketing Plan
5 basic steps:
Estimate number of bushels/animals to sell
Calculate breakeven price
Project price and production scenarios
Compare pricing tools and analyze market
opportunities
Develop a pricing plan
Econ 339X, Spring 2011
Bushels/Animals 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?
Econ 339X, Spring 2011
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
Econ 339X, Spring 2011
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
Econ 339X, Spring 2011
1.06
Seasonal Pricing Patterns
1.04
1.02
1.00
0.98
0.96
0.94
Jan Feb Mar Apr May Jun
Corn
Econ 339X, Spring 2011
Jul
Aug Sept Oct Nov Dec
Soy
Source: USDA, NASS,
Monthly Price Data 1980-2008
Econ 339X, Spring 2011
Source: Ed Usset
University of Minnesota, CFFM
Econ 339X, Spring 2011
Source: Ed Usset
University of Minnesota, CFFM
Econ 339X, Spring 2011
Source: Ed Usset
University of Minnesota, CFFM
Another Template
Econ 339X, Spring 2011
Source: O’Brien, Grain Marketing Plans for Farmers,
Kansas State University, July 2000
Another Template
Econ 339X, Spring 2011
Source: O’Brien, Grain Marketing Plans for Farmers,
Kansas State University, July 2000
Another Template
Econ 339X, Spring 2011
Source: O’Brien, Grain Marketing Plans for Farmers,
Kansas State University, July 2000
More 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/publications/DisplayPub.aspx?P=G600
Purdue University:
http://www.agecon.purdue.edu/extension/sbpcp/resources/mrktplan.xls
AgRisk website:
http://www.agrisk.umn.edu/library1/a0000037.pdf
Iowa State University:
“Mapping the Route to Better Prices: Developing a Marketing Plan”
- Available on the class website
Econ 339X, Spring 2011
Decision Trees
Econ 339X, Spring 2011
Source: Usset, U. of Minnesota
Decision Trees
Econ 339X, Spring 2011
Source: Wisner, Iowa State University
Class web site:
http://www.econ.iastate.edu/~chart/Classes/econ339/
Spring2011/
Econ 339X, Spring 2011