By Gary Sliworsky
Ag rep, Emo
Following up from last week’s article, here are the final four of seven essential elements of a marketing plan, provided by John Bancroft, Market Strategies program lead, Ontario Ministry of Agriculture, Food and Rural Affairs:
1. Marketing tools
This is where producers evaluate the pricing and delivery opportunities available to them. This may include cash sales, forward price contracts, and hedging using futures or options.
Also, check with your lender to see what tools are available to manage currency risk.
The first step is to understand how each marketing tool can manage price risk. Next, review the strengths and weaknesses of using them in your marketing plan.
Finally, consider any special requirements (i.e., extra credit) needed to make them work effectively.
Individual attitudes towards accepting and managing risk will vary depending on the situation and resources available. It can range from a preference to avoid price risk to preferring to use a risky marketing strategy to generate potential higher returns.
The challenges are to understand how each marketing tool can manage price risk, and the pros and cons of using them in your marketing plan.
2. Price targets
Knowing your cost of production helps to establish target prices to recognize acceptable market prices that are compatible with your financial situation.
A marketing plan, no matter how good, may not be able to lock in prices that cover all the costs of production all the time. As such, key target prices that compensate for specific costs are important to have in years where opportunities to cover all costs are limited.
Three price targets to consider are:
•survival price—the lowest acceptable price based on cash outflow;
•acceptable price—the break-even price based on total costs; and
•favourable price—the break-even price plus a return to management and risk.
3. Take action
Taking action to make a pricing or marketing decision probably will be the hardest part. Having a combination of strategies, and examining “what if” situations in advance as part of your planning process, will help.
Put someone in charge (i.e., yourself, spouse, etc.) of executing your marketing plan with support from your marketing team (i.e., yourself, spouse, market advisor, lender, etc.)
4. Evaluate and monitor
Noting the quality and volume of your products helps to make production decisions. Similarly, a market log book can be used to record market information to assist in executing and evaluating your plan.
The information could include cash prices, future prices, basis, marketing positions, and notes on why a decision was made. Set aside (assign) appropriate time to review the markets and your marketing goals/targets.
The bottom line is that a marketing plan helps to achieve your farm business goals and objectives. A written marketing plan helps the decision-making process and provides discipline to execute it.
Be realistic when developing the plan, keep it manageable, and monitor your progress.
Dates to remember
•Jan. 27–Grower pesticide safety course, Stratton (call 1-800-652-8573 to register).