BUSINESS AND MARKETING TOOLS FOR PROFITABLE FARMING

Market Survivor! Putting Together A Successful

Marketing Plan for 2014

Bryce KnorrJohn Otte

BUSINESS AND MARKETING TOOLS FOR PROFITABLE FARMING

Why Do You Need A Plan?

• Correlated with financial success• Avoid emotional mistakes• Respond to changing conditions• Framework for making decisions, not

a crystal ball

BUSINESS AND MARKETING TOOLS FOR PROFITABLE FARMINGWhy Do It?

49.5%

12.1%

10.5%

6.0%

4.7%

3.9%

3.8%

2.5%

2.1%

1.3%

1.3%

0.9%

0.7%

0.6%

0% 10% 20% 30% 40% 50% 60%

Falling commodity prices

Government regulations

Input costs

High cash rents

Taxes

Other, please specify

Global recession

Herbicide resistant weeds

Lack of working capital

Rising interest rates

Labor shortage

Inflation

Lack of operating financing

Falling land prices

Source: Dec 2013 Farm Futures survey

What is your single biggest overall concern for your business in 2014?

BUSINESS AND MARKETING TOOLS FOR PROFITABLE FARMING

You Know It’s Important

33.4%

25.1%

12.2%

10.3%

9.1%

4.0%

2.4%

2.2%

0.8%

0.5%

0.1%

0% 5% 10% 15% 20% 25% 30% 35% 40%

Risk management

Financial/Accounting

Communication

Technology know-how

Production management

People management

Negotiation

Agronomy

Office management

Animal husbandry

Supplier relationships

Source: Dec 2013 Farm Futures survey

What is the most important skill farmers below age 40 need to succeed in the next 10 years?

BUSINESS AND MARKETING TOOLS FOR PROFITABLE FARMINGYou Want To Do It

26.2%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%Percentage agreeing

Which of the following business practices do you expect to change or

initiate in 2014?

I will create a marketing plan and stick to it

Source: Dec 2013 Farm Futures survey

BUSINESS AND MARKETING TOOLS FOR PROFITABLE FARMING

Sure, You Have A “Plan”

66.8%

33.2%

0%

10%

20%

30%

40%

50%

60%

70%

80%

Yes NoSource:

Dec 2013 Farm Futures survey

Do You Have A Marketing Plan?

BUSINESS AND MARKETING TOOLS FOR PROFITABLE FARMING

But Is It Really A Plan?

18.9%

75.7%

0%

10%

20%

30%

40%

50%

60%

70%

80%

Yes NoSource:

Dec 2013 Farm Futures survey

Is It In Writing?

BUSINESS AND MARKETING TOOLS FOR PROFITABLE FARMING

Some Plans Are Missing Key Parts

71.6%

64.3%

63.0%

62.8%

32.0%

31.3%

30.2%

27.6%

27.4%

24.0%

23.5%

12.9%

0% 20% 40% 60% 80%

Price objectives

Cash flow requirements

Storage capacity

Profit objectives

Sell by dates

Basis outlook and trends

Fundamental outlook

Tolerance for risk

Potential strategies

Formal evaluation after marketing year is over

Technical outlook

Minimum "stop loss" prices that trigger sales…

Source: Dec 2013 Farm Futures survey

If you have a written marketing plan, what does it include?

BUSINESS AND MARKETING TOOLS FOR PROFITABLE FARMINGIs It Set In Stone?

26.8%

22.9%25.0%

9.9%

15.4%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

Never Once beforeharvest, once after

harvest

More than threetimes

More than fourtimes

Once a month ormore

Dec 2013 Farm Futures survey

If you have a written marketing plan, how often is it updated, in writing?

BUSINESS AND MARKETING TOOLS FOR PROFITABLE FARMING

18-Month Window Is Common

If you have a written marketing plan, how many months long is your window for pricing crops before and after harvest?

0%5%

10%15%20%25%30%

Months before harvest

0%5%

10%15%20%25%30%

Months after harvest

BUSINESS AND MARKETING TOOLS FOR PROFITABLE FARMINGQuestions To Ponder

• Is average OK?• How aggressive do you want to be?• How much do you want to risk?

BUSINESS AND MARKETING TOOLS FOR PROFITABLE FARMINGConsider …

• Your tolerance for risk (loss of equity)• Your fundamental outlook• Your technical outlook• Your basis outlook• Your seasonal trend outlook• Your tools• Your sales plan

BUSINESS AND MARKETING TOOLS FOR PROFITABLE FARMING

What’s Wrong With This Plan?

BUSINESS AND MARKETING TOOLS FOR PROFITABLE FARMING

BUSINESS AND MARKETING TOOLS FOR PROFITABLE FARMING

BUSINESS AND MARKETING TOOLS FOR PROFITABLE FARMING

BUSINESS AND MARKETING TOOLS FOR PROFITABLE FARMING

Data Table Matrix

BUSINESS AND MARKETING TOOLS FOR PROFITABLE FARMING

BUSINESS AND MARKETING TOOLS FOR PROFITABLE FARMINGYour Challenge

• 937.5 acres of corn• 160 bpa trend yield = 150000

expected bu• $655 cost of production, includes

trend-adjusted RP @ 85%• On-farm storage cost 3 cents/mo.• 100,000 bu. on-farm storage

BUSINESS AND MARKETING TOOLS FOR PROFITABLE FARMINGThe Rules

• Make a 2014 plan with spot sales, cash contracts and/or options. Zero basis

• Sell at harvest 10/15/14 or on-farm storage only.

• Seven windows: Jan (Now!), March, Summer, Harvest, Nov/Dec, Jan/March (‘15), April/July (‘15)

• 2014 crop must be sold by Sept. 1, 2015

• Random selection, according to historical probabilities

BUSINESS AND MARKETING TOOLS FOR PROFITABLE FARMING

Make Your Plan