As producers look ahead to 2019, it’s important to start developing a marketing plan. The American Bankers Association (ABA) released a tip sheet encouraging producers to understand their breakeven costs, create a solid action plan and keep emotions out of decision-making.
“A well-developed marketing plan can take some of the price risk off the table, which is especially important in today’s ag economy,” says Ed Elfmann, senior vice president, agricultural and rural policy at ABA. “It’s also a useful tool to help farmers and ranchers communicate with their banker.”
1. Know your breakeven costs.
Factor in all of your costs including input, debt service and family living expenses. ABA suggests finding ballpark figures from university agricultural extension services or an advisory firm. Use an excel spreadsheet to add up and track your costs.
2. When there’s an opportunity to profit, act on it.
Understanding your production costs gives you a better idea of when you can sell for a profit. Avoid one of the biggest mistakes producers make – inaction. Don’t put off making decisions because you think prices are will go up or you’re going to miss a rally, ABA says.
3. Set a goal and stick to it.
Create a plan that will help you stay on track. With so much unpredictability in agriculture, no one can know what’s going to happen, but having an organized plan helps.
4. Take the emotions out of it.
Talk to your banker for recommendations of people or companies who can help you make decisions and understand your options.
5. Keep things simple.
Sticking to your marketing plan can help you stay in business. When you make a decision, accept it and move on. Don’t beat yourself up afterward if the market moves one way or another, ABA advises.
6. Avoid spot markets.
Keep track of your local basis and understand the benefits of forward pricing.
7. Understand the tools available.
Ask questions about your options and find the best solution for you and your operation.
Click here to download the tip sheet.