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Corn+Soybean Digest

Putting Together A Marketing Plan

"I was ready to quit your service the first week I signed up," commented the northwestern Iowa farmer. "You said to sell 25% of my new corn and I sold 50,000 bu that day. The next day it was up 8 cents a bushel."

He was smiling so I knew he wasn't mad.

That first 25% sale was part of our new-crop marketing plan. The 25% recommendation was made because prices were trading above our price target.

I've looked at and reviewed dozens of ways to put together a marketing plan. For most producers, a simple scale-up plan that makes cash sales on certain key dates, or as the market rallies to top their previously set price goals, gets the best results.

With the large carrying charges currently in the corn and soybean market, having offers in for some 1999 sales to capture those often-brief opportunities is also a good idea.

Here are some preliminary steps for putting together a simple, workable marketing plan.

1) Review what you did last year. Lay out each sale - when you sold, how many bushels you sold and your average price for the year.

2) Figure your total production for 1998. Deduct any feed or seed that you will use. The remaining bushels are what you need a marketing plan for.

3) Place your sell orders. If the plan you lay out generates the income you need when you need it, then the key is to have offers in place. Seasonal odds suggest the best time to sell cash grain and new crop often occurs in May-June - right when you're busy in the field. Very often, the best selling opportunities happen early on Monday or at the close of trade on Friday.

The only way you pull the sale off is by having a sell offer in place with your elevator manager or broker.

4) Set realistic prices. I've met with a lot of farmers this fall who still had 1997 crop on hand. They wanted to start selling corn at $3 and soybeans at $8. In the current economic environment, that's not likely to happen.

In the corn and soybean market plan tables on these pages, I've listed three alternatives for you to consider. The conservative-plan price targets are the most likely to be hit, but offer the lowest rewards. The moderate-plan price targets have a 50% chance of being hit; while those of the aggressive plan have just a 10% chance of being hit.

5) Use the time plan as well. Everyone will want the aggressive plan's prices and profits. However, if the price targets aren't hit, you will need to sell a portion of your crop each month next spring and summer.

Remember what happened to prices this fall. Holding on to too much crop late in the year is usually a greed trap - and a big financial mistake.

6) Plan ahead. If you always have a lot of grain in commercial storage each fall, those are the bushels that you need to sell for harvest delivery. Pricing those bushels ahead this year would have made a huge difference in your income.

7) Implement the plan. Make sure you call your offers in and then monitor your basis. If the futures prices are hit, you make the sale. If the price target is not hit by the first date, make the 25% sale. If the second price target is not hit, make the sale on the key sale date.

The prices may be changed during the year, but the key seasonal dates have always worked very well. In these three plans, if the time-selling plan is used, then the actual sale price and total dollars generated will change as well.

Putting together a marketing plan - and then sticking to it unless unforeseen fundamental change occurs - is one of the key parts of your farming business. Discipline is critical to avoid costly emotional decisions. By recognizing the key variables and knowing when you need to generate income each year, you can begin to control your financial situation.

The old Iowa farmer who was smiling was happy because he had sold corn within 8 cents of the high for the year. He had also locked in a 38 cent loan deficiency payment on that corn this fall. He walked away with a $3 net when the local cash bid was at $1.70/bu.

He should've been smiling.

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