I am new to this gig of writing a monthly column, so I have decided to take a little of my own advice and plan ahead for 2008. You can look forward to a series of columns dealing with the task of writing pre- and post-harvest marketing plans.
During the first part of 2008,I hope to pen several columns to address the key elements of a preharvest marketing plan. Some of these key elements include establishing prices objectives, the use of decision dates to turn your efforts into a plan for action and the pros and cons of different pricing tools (e.g., futures and options) in the execution of a marketing plan.
By late summer, I will turn my attention to post-harvest marketing. Pricing grain after harvest is a very different challenge. Grain storage is rarely considered before harvest but after harvest, I like to paraphrase Shakespeare with that eternal post-harvest question, “To store, or not to store?”
How should we incorporate the incredible events of the past year into our plans for the year ahead? Should we hold back on early sales, because early sales were too cheap last year? Should we hold our grain through the end of summer, because that approach worked last year?
Allow me to offer three simple words of advice that Wally Whipsaw (see sidebar) and the rest of us should take to heart before we write our plans for the year ahead: Forget last year!
LET ME BE CLEAR — I don't want you to forget the mistakes you made last year. However, in terms of price direction, magnitude and timing, it's best to forget last year. I don't know what the next 12 months will bring, but I can assure you that it won't be the same as last year.
Again, forget last year. Tape this message to your bathroom mirror. Make it scroll across your computer screen. You could even tattoo these words on your shoulder.
Now, let's get ready for the year ahead — our start will improve if we can forget last year.
MEET THESE CELEBRITIES
In the year ahead, I will introduce you to my celebrity producers. Each one illustrates a different marketing style.
One celebrity is Grandma, who prices grain before harvest with regular monthly decisions. We will also meet Justin Price and Peter Paperfarmer. Justin uses price objectives to determine his preharvest sales while Peter makes sales in the spring but re-owns each sale with call options on new-crop futures.
Barney Binless is a celebrity producer with no on-farm storage capacity, and his harvest price will serve as a benchmark for comparison. You will also meet May Sellers, who stores her grain for sale in the spring, and Hank Holder,who stores his grain too long.
Wally Whipsaw is my celebrity producer who chooses the best time to sell based on when he should have sold last year. Does Wally's marketing plan sound funny? It does, but I also consider his approach very hard to resist. FYI, Wally's approach resulted in a price lower than the harvest price in more than half the years since 1990 (i.e., doing this year what I should have done last year is hard to resist but not very effective).
Ed Usset is a grain marketing specialist for the University of Minnesota Center for Farm Financial Management (CFFM). He can be reached at [email protected].