Why It is More Important Than Ever for Ag Producers to Create a Marketing Plan
Article By: Cathy Asher
Between the sustained lows in commodity prices and recent volatility with international trade, many agriculture producers are left feeling as if they are at the mercy of the marketplace and have little control over what they receive for their commodities.
That is why it is more critical than ever that producers develop and execute a marketing plan, according to Cathy Asher, a relationship manager for Security Financial Bank (SFB) in Durand. Asher, who specializes in agri-business lending, provided a few tips for farmers to consider when developing an operation's marketing plan. They included:
Understand Your Operation's Break-Event Cost
"Once you know this cost, you can remove the emotion from deciding when to sell," Asher said. "Your lender would be happy to assist you with calculating your break-even costs or there are several online tools available to assist you with performing the calculation. The key to arriving at an accurate break-even cost is to use complete and current financial information."
Include Pricing Objectives
Pricing objectives should consider market rallies and incorporate both futures and current pricing, she said.
Set a Marketing Timeline
"Your timeline should consider the seasonality of production and supply," Asher said. "In other words, examine when you usually see more product in the marketplace, which would generally mean lower prices for your commodities."
Consider Marketing Tools
There are several tools available to assist growers with marketing, thereby limiting price risk to the operation. These tools include (but are not limited to) basis and hedge-to-arrive contracts, puts and calls. These tools can be used in conjunction with SFB's in-house risk management tools of Multi-Peril Crop Insurance (which includes revenue protection coverage) as well as Dairy Revenue Protection.
Reasons for Your Strategy
"Don't forget to include the reasoning behind your strategy," Asher cautioned. "This final component of your plan should be included to reduce second-guessing that can sometimes come with decision making."
It's Time to Execute!
"Execution of the marketing plan is critically important. You may not perfect your marketing plan for the first cycle. Just as with production agriculture, there are tweaks that can and may need to be made from year to year," she said. "What is certain is that you will have an improved understanding of your farm's marketing gaps and will identify opportunities for growth."
Additional marketing resources for both crop and dairy producers to assist with developing their marketing plans are available at the following sites: