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Hello I'm Adam Shanks I'm the Ag, and Natural Resources Extension Educator for
Purdue Extension, in Clinton County.
Hi I'm Ed Ferris, I'm the Purdue Extension Ag, and Natural Resources educator,
in Huntington County.
And today, we're gonna to talk about the Components of a Written Marketing Plan.
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Ed, why do you think it would be important to have a written marketing plan?
Well, Adam, it's really a proactive instead of a reactive thing
that you would be attempting by completing that plan and
it's not going to be great when you first start.
But it is something personal that you spend a lot of time with and work through.
And it is something that that really shows that you've studied
the possible options that are available and tools in as in marketing.
That's right, so we're gonna look through some components and
some concepts today of a written marketing plan.
So in general, some important concepts to have about a marketing plan is that it
helps manage the emotional job of crop marketing.
If you've watched some of our previous videos we've talked about always
wanting to have the highest price and the emotional toll that goes along with,
actually making the decision to make a sale.
There's some regret and there's potentially some regret if the marketing
or the price changes and goes up after you've made that decision.
There's a fear of pulling the trigger to make either make the sale.
So having this written marketing plan really helps manage
the emotion that goes into crop marketing.
Obviously the plan should be developed ahead of implementation.
This isn't something you wanna build as you go,
you don't want to build the bridge as you're crossing it.
You wanna build this ahead of time and
use it as a roadmap when you're doing your grain marketing.
The plan should be simple and personal.
So what works for Ed when he's marketing grain may not work for me.
Ed's gonna have different risks than I'm gonna have.
Ed's gonna have different needs financially to meet than I'm gonna have.
So everything should be personal and simple because if it's too complex,
it can be hard for you to follow.
So keep it simple, manage the risk should be based on the goal of the plan.
So, looking at your risk, what you can handle, those kinds of things
are what you definitely wanna look at as a goal for your plan.
And like Ed said, this is definitely a proactive strategy not reactive.
We've talked about you don't wanna build the bridge as you're crossing it.
This is something that should be done ahead of time.
Looking ahead using some of the tools that we're gonna talk about,
in not a reactive situation.
So things to consider, you wanna look every farm is different.
You wanna make sure you look at how many bushels you're gonna have to sell.
Historically, what is your farm produced?
How many bushels are you gonna have?
You don't wanna oversell, you don't wanna undersell.
So you need to know an average of what your farm historically produces.
Breakeven cost, so again, my breakeven cost might be different than Ed's.
Probably are gonna be different than it if I bought a new tractor has Ed bought a new
pickup truck.
We need to make sure that our cost are put into place where we know
what it's gonna take to cover those.
Our cash flow needs that look at kind of that same build off the breakeven cost but
our cash flow needs in my do I have to feed my family of five.
What's Ed got to take care of to meet his cash flow needs.
The cost of production is a huge one.
Right now we're very volatile with our costs.
When we're currently recording this,
nitrogen prices are high, or herbicide prices are high.
All all of our inputs are really volatile right now.
So we wanna make sure that we take that into consideration when we're
writing our marketing plan.
Financial goals, what would be some of your financial goals may be,
is your marketing plan.
Yeah, but think about your what solvence?
What's my net worth?
And what risk can I really take based on my equity in my operation?
As on a longer-term goals and then also just thinking about what
your profitability goals are, how can I you know.
what's my working capital needs to keep going every year,
what that's that's really a critical thing is just thinking about what is it
gonna take to keep going every year.
And you know just having those in mind and
using the tool that we've mentioned, the Purdue crop cost and
return guide is a very good tool to help think about what steps I need to take.
And what's my benchmark costs and
where I need to be at as far as what price that I can
really obtain to I move forward in my marketing plan
Yeah in personally my financial goals I would like to be
able to put some money away to purchase some more land.
I also I like to make sure that I'm always liquid, so anything that I take a loan out
on or anything that I purchase I wanna make sure that I'm liquid,
that's one of my financial goals personally.
So those are things you need to keep in mind,
when you're putting together this tool, and I put a link on here this is this is
a link to the Purdue crop budget spreadsheet.
That's a great tool to use.
You can look at three different crops you can look at full season,
you can look at adding a double crop soybeans into wheat and
look at how you can budget those different scenarios.
And then look at also the crop cost and return guide the dead mention,
that looks at all these and it was updated just here last month.
So, it's got some of the new volatile prices and
that's a great way to look at what some of these things are gonna actually cost.
So that you can put those into your budget spreadsheet, and
use those to make your plan going forward.
And I put the link there at the bottom, you can get on the center for
commercial Ág and that is super easy to find those two tools right there.
Here's a demonstration or an example.
This is the updated 2022 crop cost return guide hot off the press,
so this was just done this last month.
This was put together, and it's got the new pricing on, here,
so if you look there's three different sections based on your soil productivity.
There's low productivity, soil, average and high.
And you can just work right down the line there looking at your expected yields,
looking at your costs, the harvest price.
And so this is a great snapshot.
Now this isn't the Bible.
You don't wanna take this as an everyday thing, but definitely as a good benchmark
and a good starting point, when you're putting your dragon That's changed,
we've seen it updated a few times here already this year as we're preparing for
the 2022 growing season, so.
Yeah, it's definitely it's a good bet, a good starting point.
But it definitely is it's ever changing.
So some other considerations that you wanna take into when you're putting your
marketing plan together is your price and time objective.
So how long we, what are you looking at?
When do you need to sell your grain?
When do you need to get it off the farm?
What price do you need to sell it at?
And that takes into consideration your storage capacity.
How many bushels can you store can you dry the grain on your farm?
There's a consideration there for when you when you need to be able to
move that grain based on your storage capacity insurance coverage.
You mentioned that in our last video about what kind of
insurance needs you need for banks and loan applications?
What you wanna see there to help cover right ever read Is gonna be different for
each, each producer as far as what level of and what type of crop insurance, but
that's something that should be considered when you write your marketing plan.
Absolutely, and then your capacity for
personal risk, it might be more apt to take more risk on than I am.
Maybe I'm scared to really put myself out there where it might be more willing
to take that longer hedge or that longer make that longer decision farther out.
So, just that capacity what you're comfortable with is a consideration you
need to make when you're putting this plan together, and that's some steps to take.
You need to utilize realistic price targets.
And another video we talked about, we wanna have, it's our goal we always
want to have that golden highest price, but that's generally not realistic.
Very seldom do you actually get to hit the high.
So make sure you have a realistic price target based
on covering here needs to cover your financial obligations.
And make the profit that you're desiring, and have periodic price targets and
quantities that you wanna sell.
So you say, I wanna make sure I'm hitting those higher markets,
we'll be looking at some different tools.
We need to make sure we have some bushels in those areas that we wanna get rid of.
So making sure you're tracking that as you put your plan together.
And then some tools to use, we've looked at the crop basis tool,
there's a link there that's on the center for commercial Ag.
That tracks the basis, in a previous video we talked about,
that's the difference between the board price and your local cash price.
And you want that a strong basis as a narrow gap between those two prices.
So that's a strong basis and you wanna track if you get on the sooner for
commercial Ag,
you can track that basis over the last several years at the local elevator.
And find those target points where you might wanna look at doing some marketing.
And then the was the report that's from the USDA.
That's that links on there to look at historical pricing as well.
So these are just some tools that you can use to help put that marketing plan
together.
Have patience and be open to re-evaluating.
So this is a fluid document.
Like I said, you wanna have it done proactively, but it needs to be fluid.
You need to be able to look at it maybe this worked, maybe this didn't,
I need to change this.
Obviously the volatility of our inputs in our markets right now,
you're goNNA have to be able to adjust your marketing plan.
Put it in writing, anybody can think about what I wanna do,
here's what I have, here's what I'm planning on doing.
Put that in writing, that way you've got something you can remember you can go
back and look, so yep I did this, yep I did this no need to do this.
And then have someone hold you accountable for it.
All, right, I think it's important to have somebody that you really trust if you have
a really good relationship with your lender,
that might be a person to have look at this.
Or any type of financial adviser, just somebody who's gonna hold you accountable,
and say, why did you make that call?
Was that really the right decision to go back and
look through, what you've done in the past is compared to what your plan is so?
And then, that emotional part comes back into that too, you don't like to be told
you're wrong, but you've got to understand they're trying to help you.
Right. And help make this a better operation, so
having them hold you accountable for what you put on paper and what your plan is.
Will make you better at your at your plan and your operation going forward.
Some potential mistakes that you might make,
there's that emotional thing that we've we've kind of been a theme here.
We wanna make sure that you take the emotion out of it, you're looking at
strong numbers based on what you can handle your risk what your production is.
Looking at the historical marketing points,
make sure that you're taking the emotion out of this and it's a business decision.
Anchoring, loss aversion and a regret.
We don't wanna be upset that we sold when the next day the market goes up,
be happy that you made the sale.
It's gonna cover your costs.
It's gonna make the money that you plan on making, and don't worry about what
happened the next day, but you can also celebrate if it goes down the next day.
[LAUGH] Right, Those are the winds that you look forward to, but.
Yes.
The fallacy of small numbers overconfidence and hindsight bias.
So we've kind of covered all of these you know, the hindsight,
you don't be regretful, but, and
overconfidence, you don't be too bullish on everything.
Just kind of make strategic decisions as you go along.
So that's what we have today on developing a marketing plan.
Here are some resources that we used to you're welcome to look at these and
make sure you take advantage of what's out there that produce center for
commercial Ag.
Is a great tool, great resource with lots of tools, lots of Excel tools,
you can put your own numbers in your real-time data and track things and
help out with making those decisions.
So, any final thoughts in?
No, I think that, like I said, really it's important to start,
if you have put in writing to go ahead and
get it in writing because that's that's a great way to make that first
step Which helps get you planning to build the bridge and then hold you accountable
when you're ready to cross it right, so with that we thank you very much.
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