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Corn+Soybean Digest

Marketing Maestros

Texas program helps growers earn more money Danny Krienke doesn't admit to being the ultimate grain marketer. But this Texas grower has gone a lot farther than most to enhance his ability to generate a solid profit. He's taken major steps to become a Master Marketer in the eyes of the Texas Agricultural Extension Service (TAEX). That knowledge helped him earn an extra 75/bu for his soybeans last fall.

David Peckenpaugh has the same Master Marketer label. He boosted his corn price nearly 50/bu, partly because of his involvement in the TAEX Master Marketer (MM) program. And Mike Blasingame is using his MM knowledge to protect the price he pays for corn in his cattle operation.

They're all from the northeastern Texas Panhandle and graduates of the MM program, established by TAEX in 1996. The program has helped more than 450 grain, cotton and livestock producers, along with ag lenders and other agribusiness people, become better marketers. Their training has also led to the establishment of more than 100 local marketing clubs across the state.

"With the establishment of marketing clubs by these and other MM participants, they're increasing marketing and management skills of a much larger number of producers," says Steve Amosson, TAEX economist in Amarillo and co-coordinator of the highly successful program.

The program started about the same time Freedom to Farm took shape as a means of helping producers become better marketers in the wake of the reduction in government programs. It involves 64 hours of intense training and instruction from some of the nation's foremost authorities in all areas of ag commodity marketing.

"It takes the producer to a whole new level of marketing," says Amosson. "Participants have seen a $32,000 increase in annual income as a result of using tools learned in the program."

For Krienke, the '96 MM was a way to learn more about the "technicals" involved in marketing. "I had used futures and options for as long as I can remember," says Krienke, whose Perryton, TX, crop rotation includes soybeans, wheat and grain sorghum. "I became better informed on seasonal charts, trends and other factors, which gave me confidence to expand my bean marketing."

His 2000 soybean marketing program featured both futures and options.

"In May, I sold November bean futures at $5.50, and established a basis of 48 to 60 under," he says. "When the market dropped in the summer, the projected LDP was high because of the low price. I expanded my risk management to include the purchase of $4.75 November call options for 11/bu. The calls enabled me to protect a projected $1.15 LDP in the event of a price increase."

He was tempted to take profits from the call options when their value increased from 11 to 38. "I could have sold them back for a nice profit," he says, "but with such a volatile market, I left the calls in place until harvest and sold them for 15." He then collected a strong LDP, since prices were low. And since November beans were in the $4.75 range at harvest, his $5.50 futures floor produced a price about 75 higher than if he had not been protected.

"MM has taught me that if you have a reason for a marketing plan, you should establish it, then stick with it," says Krienke.

Blasingame, also a '96 MM participant from Perryton, was involved in grain and cattle production when he took the course. Along with the marketing training he received, he also learned how to better analyze his overall situation. "I re-evaluated my operation," he says. "I decided to concentrate less on corn and wheat and more on hay production, stocker cattle and leasing wheat and grassland to other cattlemen."

His cattle program has included retained ownership of steers going on feed. "In that situation, I sometimes take steps to protect my feed costs," he says. "If I see a chance for an increase in corn prices, I use corn options to protect against an increase in my cost of gain on the cattle."

For example, if corn is $2/bu when he puts cattle on feed, he may buy a $2.50 corn call. If the price rises, he can offset a higher feed bill by moving the options position for a profit. "It's just another form of price protection," he says.

Peckenpaugh, an irrigated corn, wheat and milo producer from Farnsworth, TX, took part in a '98 MM. "I do my own marketing, so I knew it was important to learn all I could about it," he says. "I learned more discipline. I learned to not try and hit a home run every time, but instead to look for an average price that would generate a profit."

Unlike Krienke and Blasingame, he stays away from options. He prefers futures or forward cash contracts. "I forward contracted two-thirds of my 2000 corn in the spring for $2.50 and $2.60/bu," he says. So, when harvest prices were in the $2 to $2.10 range, he gained about 50 more for his grain. "That was along with a 34-44 LDP," he adds, "which was like a home run without shooting for it."

In the MM curriculum, participants are reminded of the old theory that it's overall return, not overall yield, that's important. "If input costs are too high, you don't always have to raise all you can in yields," says Peckenpaugh. "All that really matters is what you take to the bank."

All three growers followed up their MM training by establishing or renewing marketing clubs. Ochiltree County agent Scott Strawn and economist Steve Amosson helped put them together.

"The '96 club met regularly up to planting time the next year," says Strawn. "It cut back during the growing season. Growers continued to meet off and on after that."

Krienke says the club conducted introductory futures and options seminars to help participants learn the basics of commodity trading. He's often asked for advice on grain marketing strategy, both at the marketing club and on an individual basis.

Peckenpaugh helped Strawn, Krienke and Blasingame revive the club the past two years. Information from Farm Bureau, regional commodity associations and other entities have helped generate new interest in the club.

They want to get more producers involved. "Unfortunately, there are still too many people who won't get involved in risk management programs like this," says Peckenpaugh. "And it often requires taking an actual club position (in a grain or livestock futures or options contract) to maintain a strong interest in a marketing club."

Overall, there have been 10 MM sessions in Texas. The program has been so successful that USDA has a $750,000 grant to carry it to other states. Amosson will help coordinate MM programs in Minnesota and Montana. "They will essentially duplicate what we are doing in Texas," he says.

In addition, there will be short, two-day programs with advanced training to take Master Marketers to a higher level. These Advanced Topic Series programs will examine the technical and fundamental sides of marketing in depth. Their aim is to provide Master Marketers with additional tools to help create new interest in local marketing clubs.

"I can't understand why people involved in crop or livestock production wouldn't want to become better marketers," says Peckenpaugh. "They should look into an MM program or a marketing club. They are really missing a good opportunity if they don't."

Texas A&M University economists, with input from Kansas State University personnel, have developed a series of marketing club informational materials that help guide clubs through various aspects of commodity trading, crop management and other areas. This information can be found within the Master Marketer Web site (mastermar

Advice is easy to come by, but good advice can be elusive. That's why many farmers are studying to be their own advisors using the Master Marketer program developed by the Texas Ag Extension Service. The program includes 64 hours of intensive marketing training that focuses on feed grains, wheat, cotton and livestock.

The program has been scheduled twice thus far in 2001. In each case, it will be held in four two-day blocks. The Abilene, TX, sessions will be Jan. 17-18, Jan. 31-Feb. 1, Feb. 14-15 and Feb. 28-Mar. 1. The Vernon, TX, sessions will be Jan. 16-17, Jan. 30-31, Feb. 13-14 and Feb. 27-28.

For some farmers, mastering the intricacies of farm finances is much tougher than producing high yields. Fortunately, economists from Texas A&M University and Kansas State University extension services have prepared a support system for producers looking to expand their skills. It includes curriculum guides that range from assistance in starting a marketing club to materials to discuss at meetings.

The information is on the Master Marketer Web site (mastermarketer.tamu. edu/). Or call 940-552-9941 for information on the Vernon sessions; 915-653-4576 for the Abilene program.

Although there are too many curriculum guides to list here, the program provides information in eight areas: Marketing Organizations and Strategies, Price Risk, Production Risk, Financial Risk, Farm Policy and International Trade, Business Planning/Budgeting, Legal/Regulatory and Human Resource Management.

Marketing clubs allow farmers to hone their marketing skills by attending educational meetings. Interaction with other producers allows farmers to ask questions and refine their marketing strategies. According to the Master Marketer Web site, this method of education offers tremendous advantage over occasional one- or two-day workshops. Regular meetings held over long periods provide the time needed to learn actual market dynamics and gain marketing experience, while limiting financial risks.

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