What keeps a farmer in business through droughts, rising costs, falling prices and other invisible struggles? What helps you weather through?
“As an Ag marketing and risk management advisor who’s been around the block (more than a few dozen times), I’ve had the benefit of having had thousands of honest conversations with a wide array of producers,” shares Eric Osterhaus, Pinion ag marketing strategist. “This provides a perspective that very few individual operations will ever get to see. One of those perspectives is what makes some producers more resilient to the uncertainty and variability of the markets than others.”
It’s easy to pick out a few of the common traits among operations that tend to be consistently successful – and the measuring stick isn’t that they sold 100% at the top of the market. In fact, far from it.
Here are five of the core competencies seen in the most effective and resilient producers.
5 Key Traits of Resilient Producers
Long-term, successful operations are run by producers that:
1. Understand the impact emotions have on marketing, and plan for it.
There’s no way around it, selling is emotional. After all, when you talk about selling, in many cases you are determining profitability as it relates to you personally, as well as your farming family. How can that not be an emotional event? You will be emotional – it’s natural and not something to apologize for.
Rather, the key is to admit it and recognize that emotion plays a central part in the decision-making processes. The best that you can do is to stabilize your emotions: plan for it, recognize it, and use proper risk management tools to help reduce it.
Pinion Pro Tip: In many cases it takes speaking with another person, or mentor, to gain perspective and guidance. If you enlist a mentor, ensure that they are not only knowledgeable and experienced, but also working with your best interests in mind.
2. Understand what opportunity looks like as it relates to price.
Another key trait that resilient marketers possess is that they have an idea of what a “good price” looks like. A football sports analogy for this is that if you don’t establish a goal line, you just keep running until you get tired and fall down. You need to set the mark for when it’s time to spike the ball. Specifically, successful marketers study market trends as they relate to price, and they act when they see they are in that range.
Of course, there are many factors that will play a part in deciding what to do, how much to do, etc., but when you reach that defined target, follow your plan and take action. A good marketing plan is a series of steps taken throughout the year, the tools you use when you take action may change, but the process of setting further goals does not.
Pinion Pro Tip: Plan your first step, know what a good price is, and secure the opportunity with calculated urgency.
3. Are proactive and skilled with risk management tools.
“When it comes to marketing, one of the most successful traits we see in producers are those who value action over inaction,” says Osterhaus. “The combination of keeping a motivated, proactive mindset, while using risk management skills, prepares the business to grab opportunities when they’re presented.”
When it comes to managing price risk, there are only so many “tools” hanging on your tool belt, and they are only effective if you know how to use them and use them correctly. Unfortunately, studies show that most producers are “cash only” risk managers. Out of the roughly eight to 10 risk management tools available, most producers use only two or three to their advantage. In many cases, marketing decisions are limited to the cash sales made either when cash flow requires it, or the market scares them into it.
Too often producers are forced to play the defense and market “reactively” due to an unwillingness to try new risk management method – which is never typical of a long-term winning strategy.
Pinion Pro Tip: Take time to understand the benefits and limitations of all available tools – and be willing to use them when appropriate. Operating from a position of knowledge tends to help producers stay proactive and, by consequence, ahead of the markets.
4. Value “being prepared” over “being right” as it relates to market direction.
“Do you think these markets might go higher?” “Do you think the USDA supply and demand report next week is going to sink us?” “I think corn is going to go to $6.00. It’s drier than a bone and my cousin in Des Moines says they’ll be lucky to raise 50 bushel.”
An agricultural economics professor once stated that the average producer spends 90% of his/her time discussing outlook on price direction and only 10% of his/her time getting prepared for the market. For any successful outcomes to be achieved on a long-term basis, those percentages should be reversed.
The honest reality is that no one can predict where a particular commodity price will close the next day — let alone days, weeks, or months into the future. The most resilient marketers value the time spent preparing for the market, rather than spending undue time on market predictions and hopes.
Pinion Pro Tip: Although you may have a bias on the market, study and listen to research regarding price direction. Actively put plans and strategies in place to ensure that if they are wrong, or the trade is wrong, they maintain a clear path forward.
5. View individual sales and marketing decisions in a long-term, multi-year manner.
“Each marketing year is different and, as we’ve witnessed, even the best laid plans can go awry,” says Osterhaus. “Even those that use the tools correctly, are proactive in their approach, plan for emotion, and have clear opportunity targets, will have a year in which the market simply throws them an un-hittable curve ball.”
The best marketers are consistent in their strategy and approach to the markets each and every year, and they also have come to grips with the fact that occasionally they will have some less-than-desirable sales. In some cases, it may be a majority of sales made in a given year.
However, the most resilient producers take a very long-term view of marketing and marketing results. The key to their success is their consistency of thought and action. Great marketing isn’t about selling 100% at the top of the market. Rather, it’s focused on reducing the number of sales in the bottom third of the markets and doing that consistently over a number of years.
Pinion Pro Tip: Don’t get too caught up in a perceived “bad sale” and let that experience cause you to second-guess your future selling decisions. If you allow it, a few less than desirable decisions (even when made for the right reasons) can lead to several years of even worse decisions.
Build Resilience with a Forward-Facing Ag Marketing Plan
Every year there are unforeseen events – political unrest, weather surprises, supply/demand factors, money flow, and surprising USDA reports – that will roil the markets. However, with proper planning, a sharp pencil and a long-term outlook, you can reduce the risks to your operation – and protect your emotional well-being.
There is both time and room to build resiliency within your forward-facing marketing plan. Developing these five key characteristics can help alleviate feelings of uncertainty and strengthen your marketing strategy for whatever lies ahead.
Contact a Pinion advisor to establish a proactive risk management plan for your operation. Pinion’s insights have helped position agribusinesses for both survival and success – enabling effective decisions and productive results.
