Today’s farmer is forced to wear many hats. The American farmer must be an agronomist, a seed consultant, a meteorologist, a politican, a veterinarian, an accountant, a repairman, a machinery operator and, most importantly, a marketer of his produce.
Marketing can and should be one of the most important and fun aspects of your farm business. However, being good at marketing and having fun at it, requires a thorough understanding of the process. It also means a lot of hard work and a lot of time. Good marketing can mean the difference between a marginal farm operation and a very successful one. Not every farm operation has the benefit of having a good marketer making marketing decisions; however through training, hard work or by hiring someone else to help with the marketing process, each operation can improve marketing through 10 methods.
- Keep your marketing simple. Have a marketing plan that is easy to follow and clearly illustrates your marketing goals and objectives. Don’t make it too complicated or hard to follow.
- Know and understand the fundamentals of the market. Fundamentals are what determines the price of a commodity, not the technicals. You must recognize that fundamentals can and will change, however, know the fundamental trend and follow it religiously.
- Be willing to use all the various marketing tools that are available. The days of being a cash-only marketer are in the past. Today’s best marketers refuse to be limited to only selling at cash price levels and are successful because of their willingness to use all marketing tools available.
This includes; futures, options, insurance products, and different basis and forwarding contracting contracts.
- Know the technical trend of the market. Don’t pay attention to the daily technical activity as you will not be able “to see the forest for the trees” and will succumb to all the noise of the markets. Respect the technical trend and always trade with the trend.
- Leave your ego somewhere else. Marketing is not about being right or wrong; it is all about being profitable. Admit and expect you will make mistakes in marketing – admit the mistakes, learn from them and move on.
- Know when to forget about last year’s crop and focus on marketing the current year’s crop. It is hard enough to try to market one year’s worth of production, let alone to market two or more years.
- Recognize marketing is an art form, not an exact science. It takes a special makeup and a special talent to be good at marketing. If you do not have the mental or emotional makeup, the time or the knowledge to market, hire someone else to assist you.
- You can’t outguess the market, so don’t. You will not be perfect in this imperfect business, but you can be profitable. Use the marketing tools available and your knowledge and you can make money.
- Use risk management. The farm operation is filled with production risks – weather, faulty equipment, the unknown – why add to your risk by trying to outsmart the market? There is no other industry in the world that has more ways of reducing risk than production agriculture. Be sure to use these tools to reduce your risk, not increase it.
- Ask for help. Today’s producer has to be an expert in many areas: production, seed selection, herbicide and pesticide selection, mechanical and technical proficiencies, tax issues and accounting and marketing.
Today’s top producers seek professionals in all these areas and more. Don’t be afraid to seek help from a professional in each of these areas, especially in marketing.
Corn closed the week $.08 1/2 higher. With the remaining crop unharvested, end users will be concerned they will not be able to get enough crop to meet feed and fuel demand. Producers need to be making sales on rallies into resistance levels. Commercials have also been aggressively selling into this rally and are now short over 133,000 contracts. This is the largest net short position since the rally stalled on June 5, 2009 when the commercials were short 113,000 contracts.
With the commercial selling, prices have stalled during the last eight weeks of trading. If prices break lower during the winter months, producers should look to use options as a way to reown cash sales for a summer rally.
Strategy and outlook: Producers should have hedges up to the 70 percent level. Producers will want to use price weakness to re-own cash sales with futures and options on a price correction. Buy July options on a pullback into a retracement level.
Hedgers have sold a portion of the 2010 crop when December futures traded above $4.50. When prices move above last spring’s highs of $4.73, producers should look at buying new crop put option protection and add to cash sales.
Soybeans closed the week $.26 1/2 lower. A close look at the weekly charts shows an outside lower weekly close by soybeans. This sets up additional price weakness until there is a fundamental reason for prices to turn back higher.
Strategy and outlook: Producers should have hedges at the 70 percent level. With the tight basis levels and lack of carry in the market, the market is telling producers to sell the product now and use price weakness to re-own the crop with futures and options.
Buy July options on a pullback into a retracement level. Producers have sold 2010 crop when November futures traded above $10.30.
Brian Hoops is president and senior market analyst of Midwest Market Solutions Inc. Midwest Market Solutions is a full-service commodity brokerage and marketing advisory service, clearing through R.J. O’Brien.
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