ECON 337:

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ECON 337 Agricultural Marketing

Chad Hart Associate Professor chart_at_iastate.edu 51
5-294-9911
Lee Schulz Assistant Professor lschulz_at_iastate.edu
515-294-3356
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Fear, Greed, and Ego
Fear of making a bad decision -- Watching prices
slip away as you wait Greed of expecting even
higher prices -- Not taking advantage of good
price opportunities Ego of wanting to claim you
caught the market high -- Lake Wobegon
marketing
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Ego
Greed
Fear
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Changes in Price Volatility
Source Zulauf and Roberts, Ohio State
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Historical Soybean Volatility Changes
Source Zulauf and Roberts, Ohio State
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Factors Leading to Higher Commodity Prices
Source USDA-ERS, Trostle, July 2008
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Marketing Plan
To avoid fear, greed, and ego dominating your
marketing, have a plan and stick to it. A
marketing plan outlines your market strategy and
your marketing objectives. It should examine
marketing opportunities before and after
harvest.
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Marketing Objectives

• Get the highest selling price
• Pretty tough to do
• More realistic objective Obtain better than
  average prices
• Reduce price risk
• Cover cash flow needs
• Minimize tax liability
• Look at short and long-term goals for your
  business

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Building a Marketing Plan

• 5 basic steps
• Estimate number of bushels/animals to sell
• Calculate breakeven price
• Project price and production scenarios
• Compare pricing tools and analyze market
  opportunities
• Develop a pricing plan

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Bushels/Animals to Sell

• Whats your expected production?
• What do you have in storage?
• What about on-farm use?

Breakeven Costs

• What are your production costs?
• What are your storage costs?
• On-farm vs. off-farm?
• What are your cash flow needs?

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Scenarios

• Seasonal price trends
• Weather outlook
• Export picture
• Livestock outlook

Tools and Opportunities

• Market tools Futures, options, forward
  contracts
• Government tools Crop insurance, marketing loans

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Tentative Pricing Plan

• Outline realistic pricing targets
• Have periodic price targets and quantities to
  sell
• Have patience and be willing to reevaluate price
  goals
• Remember its hard to lose money when making a
  profit

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Seasonal Pricing Patterns
Source USDA, NASS, Monthly Price Data 1980-2008
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Source Ed Usset University of Minnesota, CFFM
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Source Ed Usset University of Minnesota, CFFM
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Source Ed Usset University of Minnesota, CFFM
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Another Template
Source OBrien, Grain Marketing Plans for
Farmers, Kansas State University, July 2000
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Another Template
Source OBrien, Grain Marketing Plans for
Farmers, Kansas State University, July 2000
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Another Template
Source OBrien, Grain Marketing Plans for
Farmers, Kansas State University, July 2000
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More Examples
University of Nebraska Achieving Success with a
Business Plan Case Study to Prepare a Grain Farm
Business Plan (CC424) University of
Missouri http//extension.missouri.edu/publicatio
ns/DisplayPub.aspx?PG600 Purdue
University http//www.agecon.purdue.edu/extension
/sbpcp/resources/mrktplan.xls AgRisk
website http//www.agrisk.umn.edu/library1/a00000
37.pdf Iowa State University Mapping the Route
to Better Prices Developing a Marketing Plan -
Available on the class website
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Decision Trees
Source Usset, U. of Minnesota
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Decision Trees
Source Wisner, Iowa State University
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• Class web site
• http//www.econ.iastate.edu/chart/Classes/econ337
  /Spring2013/
• Have a great weekend.