Marketing Plan Framework

What method do you use to make marketing decisions? Do you have something written down, a plan to follow? What do you do when the market unexpectedly turns? A marketing plan can help answer these questions. From this module you are given the basic benefits associated with a marketing plan. Worksheets on what is important to you and your family, along with the level of risk you are willing to take are included to help decide where to begin.

Once you know the goals for your operation, you can use a marketing plan and include more topics, for example, grain quantities and break even prices, both of which are covered in this course. Knowing what you have available to sell and the price needed can be useful because this module points out different scenarios and pricing opportunities available for you to apply to your operation. Having different scenarios included in the marketing plan can make decisions easier in the long run because you will know what options are readily available.

After a plan has been developed and put into operation, it should be evaluated to see what worked and what didn't. The questions to ask that will help improve your plan for the next year are included in this module. Each year is different and so each year's marketing plan should be different as well. Occasionally, the plan may not be successful. To keep this from happening, a section on why plans fail goes into the common reasons behind this and methods to prevent it. To get more information for your operation's marketing plan, links are included to crop, grain, and livestock marketing plans from experts at Iowa State University and the University of Missouri.

This module is a basic overview of grain marketing plans. Other modules through the course go into more depth on specific areas. By the end of the course you should have the skills and information to create a successful grain marketing plan of your own.

When Should I Sell My Grain?

For such a simple question there are so many possible answers for when to sell grain. With so many different pricing options available today, a producer can get lost in the mix and not know what the right choice is. The more knowledge you have, the more comfortable you can be with the decisions you make for your operation.

Through this module you will have access to historical information, and seasonal prices for corn and soybeans. Knowing the average prices for the past twenty years can aid in deciding the best time to market grain.

Another aspect of when to sell grain is the cost of storage. How does on farm storage as compared to commercial storage change marketing decisions? How do you figure the cost of storage, taking shrink, drying, and handling costs into account? These questions and more are addressed in this module. Realistic problems are also given for you to go through and make decisions to see what you have learned about grain sales.

Hedging and contract alternatives are options you may not think are right for you, or because you are unfamiliar with them you would rather stick with what you know works. In this module, hedging and other alternatives are explained, and comparisons are made between them and selling on the cash market. Government programs are also discussed briefly and the effect payments have on grain pricing choices. By studying this module you will get an overview of hedging and other alternatives and be able to use information from your operation to compare them in different situations to find which option is most profitable.

Financial Risk Bearing Ability

Risk is an unavoidable part of farming, but a sign of a good manager is the ability to manage risk. This module focuses on financial risk, and how much risk is bearable for an operation. Examples of three different operations and the different risks involved in each are used in this module.

The three operations consist of an:

• owner
• renter
• buyer

Each example has different cash flows and risk issues. Using the three cases, the differences between the financial measurements for cash flow, liquidity, and solvency are all discussed, and how the form of ownership affects each measurement differently.

What do you do when disaster strikes? By using the financial measurement information you can work out a contingency plan to aid in decisions during difficult years. With a well written contingency plan, you will have the financial means to make it through rough times. You will learn different measures that will help protect you from loss, and if that is not enough you will have planned ahead and have savings or other funds to help make ends meet financially.

Cash Marketing Tools

This module begins where the "When do I sell my grain?" modules leaves off, with more examples, explanations and links for cash marketing tools.

Even with all the marketing tools available, two-thirds of all cash corn and soybeans are sold in the bottom one-third of the cash price range. This module will point out other options available that can make your operation more profitable. Government programs can make up for some price loss, but other marketing tools such as cash forward contracts, short futures, futures only, or hedge-to-arrive contracts can also be used to guarantee a price. These are all discussed along with the advantages and disadvantages for each. All of these options are evaluated for the short run and spread out over the marketing year to show long term results.

Risk Analysis Tools

With multiple outcomes possible with every decision you make, how do you analyze risk for your operation? Through this module, you will be able to measure the probability of different outcomes, and be able to use those probabilities to influence your planning decisions.

This module uses many different statistics to help show what changes can be expected each year and shares how to apply the statistics using your experiences along with the opinions of experts. Using past data to predict the future is not an exact science, but it can be a good indicator of how different situations can affect prices and markets. Once possible outcomes have been established, decision rules can be applied to see which choice is best in a situation. This module breaks down the different decision rules and how you can use them to come up with a final assessment. Spreadsheets are available to visually graph probabilities for different types of operations.

Crop Insurance Options

Government programs and contracting options are available to help producers with price risk, but what are you doing for your operation to protect against yield risk and natural occurrences? This module breaks down the four main types of crop insurance, explains each one separately, and compares different plans so you know you are choosing the right one for your operation. Several links to extension publications related to crop insurance are included.

Weather and Agronomics

Out of all the variables that add risk to agricultural production, weather is the one that can not be planned for. Each year brings weather that affects yields and production in a new way. Knowing past climate cycles can also help in the planning process.

This module begins by giving data on yield trends in Iowa. It then shows yield variations in different areas, breaking trends down by Midwestern states and crop reporting districts in Iowa. Links to National Weather Centers are included with a discussion about El Nino and its effect. Other websites included go to more weather information and tell how you can use this information to plan for the next day, week, and month.

The weather in other areas can have a direct effect on the demand in your area. Knowing where to look to find out National and International weather forecasts can make you more prepared for what to expect in your local market. This module ends by giving a brief summary about what future climate changes could entail on agricultural production in Iowa.

Hedging with Futures

From this module you will learn about forward pricing with futures contracts. Pre-harvest hedging and storage hedging example problems are shown in realistic situations. Comparisons are made between contracting and hedging, and the advantages and disadvantages of each.

Opportunities for Options

Principles for grain options are presented in this module. The purpose of this module is to show how grain options markets can be used for managing price risk and for profit-margin protection. The sometime confusing terminology involved in options is explained, as is how risk is a factor even with this type of marketing.

Links to websites on localizing options contracts are included with examples to make sure you get information that is as current as possible. This module concludes with sections on how the options market can provide price protection, other ways to use the options market, and what other types of price insurance may be necessary to insure break even prices.

Outlook Information Use

The focus of this module is the importance of outlook information and how past trends can predict the future of agricultural markets. This module goes over types of outlook material and the benefits associated with it, major sources for outlook information, and how to use this information in marketing and risk management. Balance sheets for a sample farm are included to show how outlook information can be useful in making an operation more profitable. Recommendations on where to go for outside advice are given.

USDA Commodity Program Payments

This module covers the 2002 Farm Security and Rural Investment Act (FSRIA) and explains the three different types of farm commodity payments. Examples of direct, counter cyclical, and loan deficiency payments are all included along with spreadsheets to download for to use for your operation. Links are given to websites with daily prices for commodities and pricing information.

Exercises are available to find estimated payments for a sample farm before applying the information to your own farm. References to more information are also given for further study.

Course Registration and More Information

The on-line registration form for Advanced Grain Marketing is available here.

The course fee is $100.00.