If you are in the upper echelon of farmers, your marketing plan was written on the fly and is implemented by the seat of your pants. That is, if you had a marketing plan. Most folks don’t, and they are even worse off that you are. It gives credence to the old adage that 2/3 of the grain is sold in the bottom 1/3 of the price range. Only the commercial grain companies know for sure, but hopefully we are better than that. Seriously, if you do not have a written marketing plan, let’s not dwell on that, but fix the problem, by creating one. And if you don’t want to do that, show this to your spouse, who will be more than happy to help you market your grain.

After teaching grain marketing for many years, I am well aware that farmers don’t like to let go of anything they worked so hard to produce. The male farmer psyche demands that he keep his arms wrapped tightly around his grain bin. The female psyche is more objective, when it comes time to sell grain and pay bills.

Here at the first of August, many farmers have 2005 crops still in storage and are devastated by the widening basis. It does that every year at this time when your neighbors unload their grain, and grain buyers know a new crop is a month away and there is no need to tighten the basis. So the old crop needs to be cleaned out.

Here at the first of August, many farmers have not begun to sell any of their new crop, since they have had no idea how much they would be producing. However, even in the worst of drought years, you probably still have produced 1/3 to ½ of your farm average, and even pre-selling that would have jumpstarted your marketing plan for the new crop.

Here at the first of August, many farmers have had the opportunity to book 2007 crops both on the Board and in the elevator, which would guarantee profits next year. But if you are hesitant to sell the 2006 crop, it is understandable why you haven’t sold any of the 2007 or 2008 crops.

Here at the first of August, it is time to create a marketing plan that you know you should create, a marketing plan that your spouse will reward with a cherry pie, and a marketing plan that your lender will respond with an “attaboy!”

Your concern has always been, what does a marketing plan look like? And that concern is more than adequately addressed by Grain Marketing Specialist, Ed Usset, from the University of Minnesota. Usset’s fantasy farm may be a lot like yours, but if not, just adjust your acreage and yield up or down as necessary.

Usset keeps a chart of baseline prices, with monthly entries at mid-month, with a running average of how the market is performing and how his sales average is performing as well. That is important.

Usset also develops a pre-harvest marketing plan that features measured sales throughout the year with price targets, but also with the flexibility of using various marketing tools that may create premium opportunities. Such as, instead of a forward contract, break it apart into a basis and hedge-to-arrive contract that will give you the chance to enhance both the basis and futures portion of the contract. Along with the plan, Usset keeps a record of his actual sales, and how he performed compared to his plan. He also makes notes about how the plan was executed, for future reference, particularly what might be implemented differently in future years.

In addition to the pre-harvest plan, Usset has created samples of a post-harvest marketing plan, should any production changes have occurred. This allows the flexibility to respond to reality, as well as how the market is shaping up. The plan also makes provisions for Loan Deficiency Payments, should there be any, as well as how any hedges or options are exited.

Summary:
Marketing plans are excellent maps that mark the road to success. (We don’t like to ask for directions, and maybe that is why we don’t have marketing plans.) A good marketing plan will include timing of sales, price targets, and potential marketing tools. It will also contain comments that suggest opportunities for improvement in future years, and will include a running picture of how market prices are tracking through the year. The marketing plan offered by Ed Usset of the University of Minnesota is not the only one available, but it is an excellent start, if you need to start making a marketing plan.