By: John Berry
http://agmarketing.extension.psu.edu
The primary objective of a
budget marketing plan sample is to cover as many costs of production as possible.
Use the cost-of-production estimate discussed above and begin to set
target sales prices as follows:
-
Estimate the outcome of different pricing alternatives.
-
Determine a target and quantity to market.
Estimate different pricing
alternatives.
Consider several marketing opportunities from cash sales to forward
contracts to futures and options. Basis information for your local
market is necessary to analyze the futures and options marketing
alternatives. The result of considering all marketing alternatives is
to arrive at expected prices for all marketing alternatives.
These expected prices can be compared with the cost of production.
Whether the current expected prices exceed or are less than the total
cost of production, the decision becomes one of marketing a certain
percentage of expected production now or taking a risk that a higher
price can be obtained at a future date.
Determine a target and quantity
to market
Anytime a manager is
waiting for a higher price, the possibility of getting a lower price
exists. From this perspective, a marketer needs to have both a
defensive and an offensive strategy. The offensive position indicates
that you will sell when the price rises to a certain level and you are
able to cover pertinent costs. The defensive position is the price at
which you will sell some of your production in an attempt to lock in
income you might otherwise lose.
The target consists of a trigger price and quantity to sell for both
an offensive and a defensive position.
The trigger price is the price for each marketing alternative that
will create a response from the marketer. This is very important to
realize when writing your
budget marketing plan sample.
When the expected price reaches the trigger price for either the
offensive or defensive plan, a sale is initiated. The quantity you
decide to sell under each plan determines how much of the expected
production you will market at different times. Your goal is to
maximize the price you receive while minimizing downside price risk.
The Follow-Through Plan:
Once the target table is
completed, the markets must be watched to determine when either
trigger price has been reached. A key to effective marketing under
this plan is to have a method of following the markets. Futures prices
can be tracked by having continuous market information delivered to
your office, using daily or weekly closing prices, or giving your
broker or elevator manager authority to conduct the trade.
Because the trade will be initiated
at an unknown time in the future, it is necessary to make arrangements
that facilitate quick trading. Open any necessary accounts with a
broker and banker. Have forward contracts ready to be signed and
delivered. When a trigger is pulled, the decision should be easily
implemented.
Stick to your plan
Because marketing is an
emotional activity, it is important to have someone to keep you
accountable to conduct trades at the predetermined triggers. If prices
are moving up, the tendency will be to postpone pulling the trigger
because a higher price surely is ahead. When prices are moving down,
optimism says they will bounce back and you should wait for the
rebound. This is not objective marketing.
You set trigger prices in an
attempt to capture an acceptable price without undue risk. Because you
market only a portion at each target, the price expectations
experienced at each trigger can be built into future targets.
Accountability can be obtained by having another person know and
understand the marketing plan. Spouses are often in a good position to
implement a marketing plan because they may not feel as attached to
the production as the person producing the commodity.
When the target is reached, your spouse can remind you to initiate a
trade. Marketing clubs, brokers and business partners can also serve
as reminders to trade. Giving authority to grain traders to initiate a
trade at certain targets can also be a way of keeping to the
budget marketing plan sample.
Aim at a second target
Whenever a trigger is
pulled, aim at a second target. Select both offensive and defensive
trigger prices, along with quantities to be marketed. The process of
setting a target, pulling the trigger at key points and aiming at
another target repeats until all of the production is sold.
Marketers need to keep track of
what percentage of expected production is forward priced so that they
do not oversell as they repeat the marketing plan. Portions of the
marketing plan worksheet assist producers in tracking what percentage
of expected production is already forward priced.
Marketing Tips
The plan described here is
an attempt to introduce objectivity into the
budget marketing plan sample. Other
things need to occur to market production successfully. The following
tips should help make your marketing more successful.
