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DEVELOPING A MARKETING PLAN What is the basic information you need to develop a marketing plan? Determine the amounts of grain to sell Determine the marketing tools you want to use Determine when to sell Form a realistic price goal When should I Sell? We have two years to sell a crop. • Expand your window • Spread your risk • Sell in smaller increments Recently best prices have occurred in fall prior to planting. SELLING SEASONS ACCORDING TO ROACH Storage Season • manage inventory--basis • maximize returns to storage Planning Season • winter months Selling Season • Months of Mar. Apr. May and June Corn Prices--Normal Seasonal Pattern Soybean Normal Seasonal Pattern SELLING SEASONS BY COUNTRY HEDGING Pre-Plant • Recommended 10 to 20% of Crop Growing • Recommended 10 to 20% of Crop • summer weather market Harvest • Recommended 10 to 20% of Crop Storage Deadlines March 31 for pre-plant season • Planting intentions report June 30 for growing season • Crop size generally known Same dates apply for stored crop--all sold by June 30 YOU MUST SELL BY YOUR DEADLINE December Corn Seasonal December 1998 Corn chart Planting Intentions Report Crop Estimate Report November Soybean Seasonal November Soybean Chart Planting Intentions Report Crop Estimate Report What tools do I use? Elevator or grain merchant Cash Sales Forward Cash Contracts Basis Fixing Contracts Hedge-to-Arrive Minimum Price Contracts What tools do I use? Futures and Options Sell Futures Contracts Buy Put Options • Fence Buy Futures Contracts Buy Call Options • Sell and buy a call Combinations with Cash How well equipped is your tool box? The more tools available the easier it is to meet your marketing goals The added tools give you added flexibility Learn about the tools and how they work Picking the Proper Marketing Tool Basis your market indicator Know what the normal basis is • Know the seasonal patterns Tells us what tools to use Tells us if it will be profitable to store Can be used to time sales Used to indicate market conditions CORN BASIS SOYBEAN BASIS REALISTIC PRICE GOALS Start with your cost of production plus a profit Look to USDA projections Look at Carry Over numbers and % of annual needs Look at retracements look at market newsletter projections for various crop sizes USDA Price Outlook USDA Price outlook Carry Over as % of Usage for Corn Carry Over as % of Usage for Soybeans Supply Estimates Retracements Difference between high and low = $0.941 1/3 Retracement (.941 / 3) +$1.854)= $2.17 1/2 Retracement (.941 /2) + $1.854)= $2.32 2/3 Retracement (.941 /3) X 2) +$1.854)= $2.48 Your Home Work Think about how much crop you want to sell in each marketing season Figure out what marketing tools you like to use Read market newsletters and other information--Price outlook Be ready to write your marketing plan during the next class session