Marketing Recomedations for 2007-08

[almoy]

Silverback, where I live the big guys DO have prefered treatment and even they are saying that the end of the CWB means the end of smaller farmers as they will not be able to even market the grain they want. The space will be taken by the large farmers. This is already a problem with small farmers with special crops such as lentils when there is a large supply.

[silverback]

The cwb has never been able to slow the rate of consolidation on the prairies and never will.

If they can't even manage to get close to the world price in a year like this, then I have the feeling that they are speeding it up if anything.

[TOM4CWB]

ALmoy,

I think you really missed the point on marketing in a diversified innovation based system.

Container lots of wheat can be shipped by the same folks who ship special crops.

Specialty wheat and barley as in organics can fill markets the big shippers can't be bothered with! India used to be this way with pulse crops... now this is a major market.

There is much that could be done IF freedom were allowed to innovate markets. Our infrastructure is just waiting to fill the gap.

[melvill]

I'm going to hammer away at one of my favorite marketing tools - cost of production - COP.

I run into away too many producers who don't know what their COP is for each of their farm products. By COP I mean a price per bushel or per tonne or per pound based on average yields, that covers all the variable or cash costs, all the fixed costs and some or all of the family living costs, depending on how much off-farm income there is.

How can anyone make good marketing decisions - and the first marketing decision is deciding what to put in the drill box - without a carefully calculated COP based on the point I made above?

I know pencil farming isn't nearly as much fun as debating marketing policy bit I dare say it's more productive!! Tom or parsley, I'll duck if I see a missle coming from your directions. Grin.

[mustardman]

Melville, I totally agree on doing cop figures, actually great tool is Agexpert fieldmaster; great for what ifs and great aid in decision making; gives lots of good info;
It still surprises me that some producers are still looking at keeping their costs per acre down; when they should be looking at their costs per unit of production ( bus or lbs ) If not aware of cop you could end up with low costs per acre BUT a high cost per each bushel grown.

[wedino]

Wilagro>The "new" entity would be an entirely new concept, untried, and unwanted actually. <<

Why don't you & other single desk supporters take it & run with it? If it's as good as you think, you shouldn't have any problems. Offer me a fair price & I'll deal with you, but remember you can't seize my produce any longer.

[wedino]

MustardMan, you'll have to explain to me just exactly what you mean, cost/acre vs cost/bus??

[mustardman]

Snappy, we're in the business of selling bushels not acres so you have to know what it cost you to produce that bushel of grain so you know what your break even price is.
Cutting back on fert. will give you a lower cost/acre but in the end you could have a lot less bushels to spread your costs over and the end result could be a higher break-even price even though cost/acre might be less.

[mustardman]

I guess I get what your saying. But that is pretty much common sense what your saying. What I mean is that i know by not spraying for wild oats or weeds, my cost of production will go down but so will my revenue.

I do a cost/acre for years, and I've down well with it.

[melvill]

Thanks for the help mustardman. I'll send you the 20 in the mail.

What I was getting at by ranting about COP was that how can a producer make marketing decisions if he/she doesn't know what it costs him/her per bushel or per pound or per tonne to produce each crop. I like to have three target prices in mind:

1: Survival price - the lowest price I can take for a product and, at the same time, not cause serious damage to the farm business. Usually that means the survival price = cash outflow per unit sold.
2: Acceptable price - breakeven COP including all fixed and variable costs and some or all of the family's living costs.
3: Favourable price - Acceptable price plus a return on equity or return on investment or return to management. For a number to start with, I suggest the Acceptable Price plus 10%. Some may want more, some may want less.

My experience is having those three target prices in mind helps infinitely with making marketing decisions.

Comments?

[Lyndsey]

Melvill - can you email me at
lyndsey@fbcpublishing.com? I'd like
to ask you a few questions about the
COP and marketing.

Thanks!

[TOM4CWB]

Lee,

Have you seen the top "profitable" grain producers... and what is there biggest competitive advantage that gets them on top?

Could it be:

Low capital/equip. overhead costs,

Low labour cost,

Low input costs/ac.,

High % of marketing in top end of the prices avaliable during a market period,

Focused management that gets work done in a timely manner... without big mistakes or accidents.

Our productive expectations are 10X that of the folks in the Ukraine Charlie just spent a month with.

How many hours a week are spent on community service?

How many hours a day spent with family?

What is a productive person who prospers in 2007?

How does a farm manager prepare and execute a plan to be successful?

How much of this is... "Cost of Production"?

What is a healthy grain farm?

[TOM4CWB]

Lee,

Sorry I kind of messed up people's train of thought!

But in recent courses on risk management... it is clear that we are to spend $.50/bu to get $1.50/bu... even if the base price is a profitable $3.00/bu for corn (and well above the COP) for instance. $4.00 is not as good as $4.50... but it sure is better than $3/bu. I think this is the point.

How much work are grower managers prepared to do... in a volitile market... to get that last $1/bu?

CWB tactics need to have a diciplined strategy to maximise our returns... NOT AVERAGE THEM.

Kind of like standing in front of that freight train... when it skids to a stop and goes backwards fast... it doesn't matter which way it goes... the locomotives go just as fast in either direction!

If you stand on the track while the train comes... you will be hit!

THe issue is this... what is the plan?

Doing nothing is a plan... but does it maximise our marketing returns?

I think NOT.