Making Your Marketing Plan

WRITTEN BY Katie Tangen, Market Education Specialist

It’s amazing the difference a year can make! As spring approaches and the first seeds of the 2021 crop prepare to go in the ground, producers are faced with a totally different market than last year at this time. Corn, soybeans and wheat have done a 180 degree turn from what was a very bleak outlook in 2020. Now, the potential for profitability is there— and good profitability at that!

Unfortunately, that doesn’t necessarily make selling bushels any easier. While low prices pose one set of challenges, rising price environments can also be difficult to manage. Here are some things to think about as you look ahead:

ONE — Think about your crop insurance coverage. This is really the base of your marketing plan. Carrying the correct level of coverage means you can take advantage of rising prices. What do I mean? Markets rally when there’s uncertainty. Uncertainty means you, as a producer, are probably thinking, “What if I don’t get a crop?” That’s a valid question, but once the crop is planted, coverage has attached. As long as you carry a Revenue Protection (RP) policy and stay at or below your covered bushels, this won’t be an issue. If you have to buy out of a contract and prices are higher in the fall because no one has a crop, your claim will be paid at the higher price.

TWO — The flip side is coverage doesn’t attach until the crop is planted. Is it a good idea to sell up to your guarantee before anything is planted? No, probably not. However, it’s likely something will get planted. Remember that selling ahead of planting means you are committing to put a certain amount of acres in the field. The level of comfort selling ahead of planting is going to vary between individuals, but generally speaking, 20% to 30% of expected production is going to be okay.

THREE — Margins. Farmers don’t make money on the price of corn, soybeans or wheat alone — they make money on the price of corn, soybeans or wheat over inputs. If you are selling substantial quantities ahead, make sure your inputs are booked and your rents are locked in. Vice versa, if you are buying inputs, you should probably be selling some grain. There’s isn’t much that’s more painful than buying high-priced fertilizer and selling low-priced corn 18 months later.

FOUR — Write it down. I know, you’re sick of hearing that. But, there’s a reason so many marketing advisors, farm management instructors, and bankers say this. It helps keep you focused. If you have to, write down why you picked this price. No one’s saying you can’t revise targets if market outlooks change, but having a plan, and having it written down gives you some commitment. Even better, call the elevator and put orders in. Just don’t call five cents before they hit and take them out.

FIVE — Ask questions and have a converstaion. There is nothing wrong with asking questions or having a conversation with someone that’s not so close. This could be a trusted friend, a spouse, your loan officer, insurance agent, farm management instructor or otherwise. Different perspectives can bring up things you haven’t thought of before. Those conversations may or may not change your approach, but they will give you confidence to see it through.

Lastly, as you put together plans for 2021, remember in marketing no one is right. There are no right answers for everyone; there are only right answers for you. Cost structures are different, and neighbors do things differently. That’s okay. Don’t get hung up on that. Don’t get stuck on the fact that prices are rising either. It’s all too easy to look back when we have rallying markets and say, “I wish I hadn’t made that sale.” You can’t change it. You probably shouldn’t even try to average it. You just need to look ahead on what’s not sold along with your financial position and make a decision from there. It’s easier said than done, but that’s what the marketing education department is here for - to help talk through the risks and rewards of your marketing decisions. If you have any questions throughout 2021, please call Rob Fronning, Jeff Beaudry or myself and we can help you weigh out some of these choices.