DEVELOPING A MARKETING PLAN

What is the basic information you need to develop a

marketing plan?

Determine the amounts of grain to sell

Determine the marketing tools you want to use

Determine when to sell Form a realistic price goal

When should I Sell?

We have two years to sell a crop. • Expand your window• Spread your risk• Sell in smaller increments

Recently best prices have occurred in fall prior to planting.

Storage Season• manage inventory--basis• maximize returns to storage

Planning Season• winter months

Selling Season• Months of Mar. Apr. May and June

SELLING SEASONSACCORDING TO ROACH

Corn Prices--Normal Seasonal Pattern

Soybean Normal Seasonal Pattern

Pre-Plant• Recommended 10 to 20% of Crop

Growing• Recommended 10 to 20% of Crop• summer weather market

Harvest• Recommended 10 to 20% of Crop

Storage

SELLING SEASONSBY COUNTRY HEDGING

Deadlines

March 31 for pre-plant season• Planting intentions report

June 30 for growing season• Crop size generally known

Same dates apply for stored crop--all sold by June 30

YOU MUST SELL BY YOUR DEADLINE

December Corn Seasonal

December 1998 Corn chart

Planting Intentions Report

Crop Estimate Report

November Soybean Seasonal

November Soybean Chart

Planting Intentions Report

Crop Estimate Report

What tools do I use?

Cash Sales Forward Cash Contracts Basis Fixing Contracts Hedge-to-Arrive Minimum Price Contracts

Elevator or grain merchant

What tools do I use?

Sell Futures Contracts Buy Put Options

• Fence Buy Futures Contracts Buy Call Options

• Sell and buy a call Combinations with Cash

Futures and Options

How well equipped is your tool box?

The more tools available the easier it is to meet your marketing goals

The added tools give you added flexibility

Learn about the tools and how they work

Picking the Proper Marketing Tool

Basis your market indicator

Know what the normal basis is• Know the seasonal patterns

Tells us what tools to use Tells us if it will be profitable to

store Can be used to time sales Used to indicate market conditions

CORN BASIS

SOYBEAN BASIS

REALISTIC PRICE GOALS

Start with your cost of production plus a profit

Look to USDA projections Look at Carry Over numbers and % of

annual needs Look at retracements look at market newsletter projections

for various crop sizes

USDA Price Outlook

USDA Price outlook

Carry Over as % of Usage for Corn

Carry Over as % of Usage for Soybeans

Supply Estimates

Retracements

Difference between high and low = $0.941

1/3 Retracement (.941 / 3) +$1.854)=

1/2 Retracement (.941 /2) + $1.854)=

2/3 Retracement (.941 /3) X 2) +$1.854)=

$2.17

$2.32

$2.48

Your Home Work

Think about how much crop you want to sell in each marketing season

Figure out what marketing tools you like to use

Read market newsletters and other information--Price outlook

Be ready to write your marketing plan during the next class session