When it comes to marketing, how many times have you told yourself to just do it and you just…don’t? Even when you feel like you really should. Here’s an analogy which might help you relate to why it’s so hard to take action:

 

Recently a friend went to the orthopedist for a nagging injury. The doctor took a look at her MRI, took a few minutes to tell her his diagnosis and recommended that she schedule a cortisone shot. Great, right? Except, in spite of the time the doctor took with her, my friend doesn’t really feel like she knows enough to make a solid decision.  She’s not sure what activities she should or shouldn’t be doing to avoid injuring herself further after she gets the shot. She’s wondering if a cortisone shot is the best solution given her activities. Furthermore, she’s more than a little concerned about her future prognosis. Upon her return home, she spent far too much time on Google and talking to friends, and all that conflicting “research” did was make her feel more anxious. So, yes, she’s gotten good advice, yet she doesn’t feel confident acting on it.

 

My friend’s experience and frustrations echo how many farmers feel about marketing.  A marketing guru can tell you what to do, and still may feel like you don’t have a clear understanding or context for the decisions you need to make, especially with all the competing information at your fingertips. Furthermore, you may feel like you’re pretty adept at understanding HOW to make a decision (like making a sale or buying a put). Still, that doesn’t mean you’re entirely comfortable understanding why this solution is best, and why now. And let’s be honest with each other – if you’re not comfortable with why you’re making a decision that affects the financial health of your business, it’s more than likely that you won’t follow through or will constantly second-guess yourself.

 

 

It’s Time to Get Comfortable and Curious

 

One of your most important responsibilities as a business owner is to make decisions. This doesn’t mean that you need to be the expert in all the areas of your business. You do, however, need to be adept at asking educated questions and evaluating the recommendations of your employees and contractors. Whether you own or delegate an area of expertise, the ONLY way to make a decision comfortably is to build context over time to get the big picture. So, let’s help you get comfortable by outlining some simple and effective action steps to becoming a more confident marketer.

 

• Ask questions – Above all else, there’s one action you can take to become a better marketer, to become more comfortable with the marketing decisions you make now and in the future. Ask your advisor why. You don’t understand how to interpret a chart put in front of you? Ask. You don’t understand why prices moved in one direction when the facts on the ground seem to point in the opposite direction? Ask. Asking is the first step to learning so that you’re ready the next time a similar situation occurs. Ask to give yourself the confidence to make a sale or to give you the reason to be a little more patient before making the next sale. Only through curiosity can we really learn. Can you think of a better reason to learn than to work toward maximizing the price you get for your hard work?

 

• Create a plan – Can you imagine investing all your money in the S&P 500 and then exiting a position whenever you need to pay a bill? Talk about adding risk to your financial outlook! And yet, many farmers treat their bin like a checking account, selling grain and taking on market risk every time they need to pay a major bill. Instead, build out a marketing plan that includes upcoming purchases and how much inventory needs to be sold by when. For instance, if you know ‘X’ amount of corn needs to be sold by April 1, note this in your plan. Make sure you revisit your plan regularly to track what’s coming up. Sell bushels accordingly ahead of time, when you see that prices are advantageous.

 

• Set time aside to absorb the basics of the market – One of the best ways to feel comfortable pulling the trigger is to develop an understanding of how the market is moving and why (even though you may never learn why). More specifically:

1. 1. Keep track of market movements – To help you build a sense of the market, set aside just a few minutes a day or every few days to track prices. This will help you get a great sense of relative value, which in turn will help you feel more comfortable making sales according to the plan you’ve put into place.
   2. Focus on the basics of fundamental analysis – Pay attention to supply and demand and why prices are moving higher and lower. Importantly, focus on what’s happening both locally AND globally for your crop. This includes noting how the prices of one commodity like soybeans can affect prices of another (like soybean’s products, soymeal or soy oil). This will help you understand current and potential pricing changes for your crops.
   3. Focus on the basics of technical analysis – Technical patterns are often a reactive representation of the fundamental drivers, so it’s advantageous to learn and understand basic price patterns. For instance, begin with simple bar charts and candlestick charts. (While they look different upon an initial glance, they show identical information.) These charts enable you to track where prices have been and help identify current value, relative to price points in history. Identifying simple reversal patterns could also be helpful as you become ready to progress to more advanced charts.

• Incorporate more and more basic tools into your marketing – Finally, learn and integrate basic tools into your toolkit to help you maximize marketing potential. (Note: these are in order of priority as you move from most basic to more sophisticated.)

1. 1. Spot selling – You are most likely already familiar with spot selling, where you deliver on a certain day and sell at that day’s price.
   2. Forward contracting/selling – A signed contract to deliver at a time in the future (such as tomorrow, next week, or 3 months from now) at a price determined when the contract is negotiated.
   3. Stops – A highly effective pre-set order that triggers an automatic sale at a pre-determined level. You could define a stop price below or above the current price.

      Consider incorporating this particular strategy sooner vs. later into your marketing. Anyone that has been involved in the markets in any significant way has seen the market get away from them and watched in horror thinking, “It can’t go much further! I’ll get out when it turns around!” Well, the market doesn’t always turn around. Sometimes prices blow up in your face when you should have sold a day or a week earlier, back when you had that little voice telling you “This doesn’t look good!” A simple stop strategy will go a long way to mitigate the emotional and financial stresses of those situations. (Check out Selling When Prices Are Down? Why Would You Do That? , which details the nitty gritty of how stops work.)

   4. Hedging with Futures – A contract on the exchange that allows you to set the futures portion of your price (the primary price mover) and set basis later when it is more advantageous. This is for a more seasoned marketer who understands the principle of how futures price and basis combine to determine your cash price. The use of Hedge-To-Arrive contracts and futures contracts is very similar.
   5. Purchased Puts – Essentially price insurance contracts for grain producers (sellers) to help protect against a price decline.
   6. Purchased Calls – Essentially price insurance contracts for grain producers (sellers) to help protect against a price increase.
   7. Buy backs – Using futures contracts to “re-own” your previously sold grain.

 

 

 

Getting Going

 

For those of you who are TFM clients, your advisor is available to answer questions and to help you every step of the way. Your advisor can help you get comfortable incorporating any of these concepts into action. If you’re not with an advisor, I invite you to talk to us and invite you to consider us as a valued resource to help with your marketing. And above all, remember – the goal is not to use the most sophisticated strategies or the most complicated (and expensive) strategies. The goal is to build the most effective weighted average price for your production by making smart, simple decisions designed to enrich only one person – you.

 

 

Total Farm Marketing Can Help

 

For almost 40 years, Total Farm Marketing has helped farmers be successful in any market condition.

We can help you set up a plan that prepares you for whatever the market does rather than on what you hope it will do.

 

Give us a call at 800.334.9779 to learn more.

 

©September 2024. Total Farm Marketing. Futures and options trading involve significant risk of loss and may not be suitable for everyone. Therefore, carefully consider whether such trading is suitable for you in light of your financial condition. No representation is being made that scenario planning, strategy or discipline will guarantee success or profits. Examples of seasonal price moves or extreme market conditions are not meant to imply that such moves or conditions are common occurrences or likely to occur. Futures prices may have already factored in the seasonal aspects of supply and demand. The data contained herein is believed to be drawn from reliable sources but cannot be guaranteed. Reproduction of this information without prior written permission is prohibited. This material has been prepared by a sales or trading employee or agent of Total Farm Marketing and is, or is in the nature of, a solicitation. Any decisions you may make to buy, sell or hold a futures or options position on such research are entirely your own and not in any way deemed to be endorsed by or attributed to Total Farm Marketing. Total Farm Marketing refers to Stewart-Peterson Group Inc., Stewart-Peterson Inc., and SP Risk Services LLC. Stewart-Peterson Group Inc. is registered with the Commodity Futures Trading Commission (CFTC) as an introducing broker and is a member of National Futures Association. Stewart-Peterson Inc. is a publishing company. SP Risk Services LLC is an insurance agency and an equal opportunity provider. A customer may have relationships with any of the three companies.