There are four major steps in developing your grain marketing plan.
Step 1: Determine expected crop production and cost of production
As the first step in developing your marketing plan, you should detail the basic information about the crop to be marketed, including the expected crop production. The proportion of expected production or expected crop revenue that is protected by crop insurance may be used as a guide to determine how much production can be priced during the pre-harvest period.
You can purchase crop insurance policies that will cover production losses, also known as yield protection (YP), or production and revenue losses, also known as revenue protection (RP). Paul Mitchell, Professor of Agricultural Economics and Extension State Specialist at UW-Madison, recommends that farmers who are marketing grain should not use YP policies for crop insurance. “The coverage is not sufficient or robust enough to protect you from multiple scenarios that could affect your farm. RP insurance fits a crop marketing plan the best. Most farmers carry 75%-80% coverage on revenue insurance.”
Step 2: Set marketing horizon
In the second step of developing your marketing plan, you should consider when you want to market your commodity or the marketing horizon that your plan will cover. You should also identify the start date of your plan and the dates or time period that you plan to review and update your plan.
Are you planning to market the crop pre-harvest, at harvest or post-harvest?
Depending upon the marketing horizon that you choose, the marketing plan and pricing strategies will differ.
For example, It is not recommended to price 100 percent of your expected production pre-harvest. Instead, it is advantageous to consider various pricing strategies that can be used for a portion of the crop before and after harvest.
Step 3: Determine pricing objectives
In the third step of developing your marketing plan, you should review your pricing objectives and determine target market prices to meet your farm business needs. Knowing your cost of production from step one is useful for setting target pricing objectives for your marketing plan and is essential for making sound marketing and pricing decisions.
Step 4: Set goals and objectives
In the fourth step of developing your marketing plan, you should detail specific goals and objectives that you want to achieve and specific actions or strategies that you plan to follow. A plan of action will prove to be more beneficial than action without a plan.
The most common goal that farmers have in developing a marketing plan is to improve their profits when selling grain. You may have a goal to:
- Sell your crop for more than the highest available price during the marketing horizon,
- Sell your crop for better than the average price available,
- Sell your crop at the middle price, or
- Sell your crop at harvest.
Reducing price risk by protecting against harmful price moves is another common marketing goal.
Define Market Strategies
As you finalize your market plan, you need to have a thorough understanding of the potential strategies or alternatives available to market your grain. You may find some strategies more useful than other strategies depending upon your goals and objectives.
There are various grain marketing tools that are available.
Let’s review a partial listing of popular strategies that you may use at various times to market your grain.
The key point in determining your marketing strategy is understanding that there are multiple tools and strategies that can be used to market your grain during your marketing horizon.
Summary
A marketing plan is a road map that lays out the specific goals and objectives you have developed. There are factors that may influence your marketing plan.
Your plan must be flexible and able to be adapted when market conditions change and price objectives are not met. If a goal or objective is satisfied, you made an excellent marketing decision REGARDLESS of what happens to crop prices later.
Your marketing plan should identify exactly how much speculation (risk) you are willing to tolerate to achieve your goals and objectives.
