23 Jun 2021

9 Requirements for successful crop marketing plans

1. Have a plan in place

Fear and greed are powerful emotions. They will affect your decisions and a solid plan is the only effective weapon against them. A well structured, personalised crop marketing plan gives the user more security and the feeling of operating a viable and competitive business. [1,2]

2. Address your uniqueness

Crop marketing plans should also account for the different production and hedging approaches that differ between geographic areas.

It is also important to account for the fact that no two farmers are the same and that their crop marketing plans must accommodate this uniqueness. [3]

There is no exact formula, but there is a smart framework of guiding principles and digital tools CropsProfit utilises and you can read more about in part 2 of this topic called why build personalised crop marketing plans with CropsProfit?

3. Account for each season’s variables

“Marketing plans are a crucial part of grain production. Farmers should ensure that whatever plan they decide on at least covers production costs.” [8, p.25]

Every season’s basis delivery differential should be easy to change and the profit recalculated. Post-harvest a crop’s storage cost also automatically be taken into account and exit instructions should be based on reaching the season’s profit goals while taking the added storage costs into account. Displaying this graphically will go a long way to help visualise the impact of storage costs. 

A marketing plan is therefore a proactive strategy to price your crops effectively. A proper pricing strategy must therefore consider amongst other things your profit goals., break-even cost, basis delivery differential, storage cost, anticipated harvest yield, and appetite for risk.

4. Apply marketing principles

“More research and educational efforts are needed with respect as to how much to contract, which type of contract to use, and to identify the frequency of contracting.” [4, p. 562]

For a crop marketing plan to be successful, it is important to practically apply the principles of how much to contract (position sizing), frequency of contracting (marketing cycles), certain and uncertain harvest marketing instruments into a crop marketing plan.

You can read more about effective contracting in part 2 of this topic called why build personalised crop marketing plans with CropsProfit?

5. Know when the market is offering a profit

Linking an up-to-date crop marketing plan to live market process makes you better informed as to when you’ll reach your profit goals and can hedge (sell) some of your crop. [35]

6. Get outside inputs

The ability for a producer to create and interact with a team of trusted partners for his farm is important, even producers and lenders can also work together. [5, 6]

To improve farmer’s marketing management skills a team’s approach will better enable farmers to interact with committed marketing experts on a daily basis. This can lead to more informed decisions and increased profitability for all the participants in a team. [7]

Larger farming operations already have more human capital resources with specialised skills, this enables them to adopt more complex forward pricing methods. A more structured teams approach will not only complement the larger farms but also empower the smaller farms to have easier access to specialised marketing skills. [4]

7. Good reporting

Reports to properly measure the performance each season between seasons, compare actual decisions to simulations, compare different crops and benchmark a farmer’s own performance against other anonymous farmer groups should be available. [5]

8. Incorporate pre-harvest pricing

In the pre-harvest period, there is a lot of uncertainty about what the final harvest yield will be, therefore the reluctance to do pricing. Simplifying the pricing process in this period and using the correct marketing tools are important factors. [2]

Having a realistic crop marketing plan in place during this pre-harvesting pricing period can alert you to profitable marketing opportunities, this can add enormous profits to your farming business.

9. A clear exit strategy

Exit instructions should be based on reaching the crop marketing plan’s preset profit goals for that season. [2]

In order to have an exit strategy that works a good marketing plan must help you to have clear exit rules in place when a situation in the market presents itself. This makes it much easier because you know when you reached your profit goal, you know how much to sell, at what price, and when.

Uncover the value of CropProfit in more detail by downloading the eBook below:

 

New call-to-action

 

Reference list

  1. Nyman, R. (2015). Farmers preferred end-values related to their use of forward contract, Swedish University of Agricultural Sciences, Department of Economics (Master’s thesis No.  935), ISSN 1401-4084. Retrieved from http://stud.epsilon.slu.se
  2. Usset, E. (2018). Five Common Mistakes in Grain Marketing. Farmers Conference, Feb. 28 2018. Retrieved from  https://farmsmartconference.files.wordpress.com/2018/02/18fs20-ed-usset-five-common-mistakes-in-grain-marketing.pdf
  3. Ueckermann, E. M., Blignaut, J.N., Gupta, R., Raubenheimer, J. (2008). Modelling South African grain farmer’s preferences to adopt derivative contracts using discrete choice models, Agrekon: Agricultural Economics Research, Policy and Practice in Southern Africa, Vol. 47, No. 2, 222-239. doi10.1080/03031853.2008.9523798
  4. Jordaan, H., & Grove, B. (2007). Factors Affecting Maize Producers Adoption of Forward Pricing in Risk Management: The Case of Vaalharts. Agrekon: Agricultural Economics Research, Policy and Practice in Southern Africa, Vol. 46, No. 4, 548-565.
  5. Schafer, S. (2016). Cash In With a Well Written Commodity Marketing Plan, Agweb Farm Journal, 02:52PM Nov30, 2016, Retrieved from Agweb.com/article/cash-in-with-a-well-written-commodity-marketing-plan-NAA-sara-schafer.
  6. Roberts, D., & Mc Fadden, S. (2010). Lean Hogs Hedge Model and Crush Margin Calculator, AgStar Scholar Research Project, Department of Applied Economics, University of Minnesota. Retrieved from https://www.apec.umn.edu/sites/apec.umn.edu/files/lean-hogs-hedge-model-and-crush-margin-calculator.pdf
  7. Brown, A. N., Ortmann, G. F., & Darroch, M. A. G. (1999). Use of maize marketing alternatives and risk management tools by commercial maize farmers in South Africa. Agrekon: Agricultural Economic Research, Police and Practise in Southern Africa, 38(3), 275-301. doi: 10.1080/03031853.1999.9523555
  8. Coleman, A. (2017, September 5). Learn marketing mechanisms to maximise grain profits. Farmer’s Weekly. Retrieved from https://www.farmersweekly.co.za/farm-basics/how-to-business/learn-marketing-mechanisms-maximise-grain-profits/