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As recently as just a few years ago, crop marketing was something of an afterthought for many growers in North America.
With crop prices reaching levels not seen in some time, farmers had a tendency to focus their energies on production rather than marketing. As a result, potentially poor marketing decisions were often masked by high prices and historically wide margins.
Given the lower crop prices of late, growers can no longer afford to treat crop marketing as a luxury, says John Snell, Senior Vice-President at the FCM Division of INTL FCStone Financial Inc., a global financial services organization that specializes in commodities.
“Of course everyone got a little complacent. Higher prices made people’s marketing efforts seem better than they really were,” Snell says.
“Now we’re arguably going back into more historic times with margins being tighter. Understanding where those margins are and being able to identify a positive margin and lock in those positive margins is more crucial now than ever. In many instances a little savvier marketing plan can spell the difference between that farm making money this year or losing money.”
Creating a savvy marketing plan
One of the most important components of any crop marketing strategy is knowing your data. This includes knowing your real costs and margins on an ongoing basis, which Snell says is critical considering how volatile prices and margins can be when it comes to commodities.
“The No. 1 thing for growers, just like any corporation, is they need to know their numbers, their costs. Without that they’re flying somewhat blind,” he says.
“Historically farmers have spent a lot of time on the production side of their business and planting the crop. What has often been left to chance is the marketing side of the business, their actual margins.”
Be aware of global markets and prices
Another equally important component of a strong crop marketing plan, according to Snell, is having transparency and an understanding of each element of your sale price. Those elemental variables include both the local and world supply demand picture, along with a strong focus on currency influence on today’s market prices.
Currency affects both the grower’s input costs as well as the volatile crop marketing price, says Snell. This influence exists not just in Canada and the US but around the world. The North American farmer needs to compare his pricing to not only U.S. pricing, but also to Ukraine, Russia, the EU pricing, and that of many other grain exporting countries.
“Wheat prices are $3 lower than two years ago. It’s not necessarily because of what’s happening in here but what’s happening elsewhere in the world and the fact they’re growing more wheat.”
According to Snell, in today’s volatile markets, it’s no longer enough to simply focus on what your neighbor is doing or what’s happening elsewhere in your area. Growers need to be aware of what is happening in foreign markets and how changes there, including fluctuations in currency values, can impact them.
Simplicity and discipline are key
Finally, Snell cautions that effective marketing doesn’t necessarily have to be complicated. While some companies offer structured deals that come with a high level of complexity, growers need to make sure they understand exactly what they are signing up for.
“It doesn’t have to be complicated to be good. In fact, I would argue the [opposite] is true,” says Snell, whose company has a strategic partnership with Decisive Farming. “What really needs to be brought to the table is more discipline and discipline doesn’t necessarily mean complexity. Complexity in fact can be dangerous.
“That’s something we often see in the marketplace, people saying they have a silver bullet opportunity. That’s not the case. Marketing is still hard work.”
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