Marketing resolutions in the new year: improving your marketing plan

Shay

Foulk: Welcome back everyone to another episode of the Ag View Pitch. Today you have Shay Foulk with Garret Brown. And Garret, you know, today's conversation as we look at some marketing decisions in the new year, and maybe as we just think about marketing in general, a little bit of a different perspective, not just on, hey, what's going on in the marketplace right now, uh, what's causing the volatility, uh, the weather stuff, you know, maybe a little bit different than the typical stuff we hear in marketing. Can you just kind of give me a 30,000-foot introductory level of, you know, how you're changing with the marketing services that you offer, but more importantly, just what you think is really important as we head here into 2022?

Garret

Brown: You bet, Shay. I guess first thing, you know, I, like most people, probably most farmers, kind of tended to look at things from a fundamental perspective only. I used to kind of think, well, technicals, it's just a bunch of lines on a chart, you know, or indicators, whatever. But just kind of came to realize that, you know, the technical indicators themselves or the statistics, there's something going on behind those things. And that is effectively everybody that is active in the market, engaged in the market, taking a position based on what they think they know. And then so through the study of that price action gives us kind of a real up-to-date picture or view on price action, and then through statistics trying to improve the decisions we make and basically try to have less emotion.

Because quite frankly, when you think about the fundamentals, you know, right now, you know, the soybean market's rallying pretty good here with dryness concerns being kind of the main headline, but how do you apportion values and gains to any specific reason? And I think that was part of it. It's you just don't know. And you don't know when something's going to turn. So kind of trying to come up with rules on when, when do we want to make decisions became paramount. And turning to math, I guess, has helped us to try to do that better.

Shay

Foulk: You know, so when you say things like technicals and fundamentals and lines and charts and graphs, that can be pretty scary from someone that's not familiar with it. And Maybe not scary, but it's just, it's a new language. Maybe it's a different way of thinking about things. How do you go about simplifying that for the farm operation that just wants to have targets? Kind of the first thing we want to look at here is actually defining what your goal is in your farm operation. So for someone that's not as familiar with the technicals and fundamentals, what do they need to be thinking about when they work with a market analyst or a broker or someone that's in the business that you're in You know, what information are you sharing with them that helps them in these decisions?

Garret

Brown: Well, I guess the first thing, you kind of touched on goals for a second. So, you know, I'd kind of been thinking about, about this topic here lately and kind of what we're going forward with. And I think the first thing is just defining what those goals actually are. Make sure that those goals are measurable and make sure they're reasonable. So You know, just an example, let's just say you're benchmarking yourself. You know, I think there's a statistic that says, you know, I don't know, is it two-thirds of the cash grain or two-thirds of the grain is sold in the bottom third of the price range? So let's just say you're going to try to be in the top half. That's, it's measurable. And I should say top half of what was available to you when it was all said and done. Right. And, you know, is it reasonable? Maybe. Is it something that you can achieve?

And so I think keeping those goals as simple as possible It makes it easy, I guess, and what a better time than going into the new year. Now, as far as simplifying it, again, I would just basically say to an individual, when we, when we study price action, we kind of define what has the market done in the past, and is it more than likely that something similar could happen in the future, and if it increases our odds, I guess. Then that might help to give us an edge.

Shay

Foulk: So, and some of that, some of that comes from, you know, taking the emotion out of it. Kind of the second point here that we wanted to touch on is, you know, drawing a line in the sand. So, you know, what, what is that hard target? So a little bit different than a goal, you know, a goal is I want to be, uh, you know, this far priced, I want to, I want to hit this margin target, whatever. But the line in the sand is saying, okay, when I, when I see these conditions, or when we see this price point based on this margin target, we are going to do X, Y, and Z. Is that what you mean by line in the sand? Is it, is it as hard and fast as that? Or is there a little bit more play there?

Garret

Brown: Well, there, I mean, that could, that could be part of it. But kind of what I, what I was going to is drawing a line in the sand on what's important, Rachel's goal. So like, it's pretty easy to say that we're all overburdened with information. Information is all over the place. And quite frankly, we got to the point where we all kind of think information should be free, right? Just because it's kind of puked up. I mean, you can get market intel pretty much anywhere, you can get Daily Wires for, for no charge, you can get— I mean, there's no shortage of Daily Wires. But I guess me personally, I'm not sure how much value there is for a farmer, for an average farmer anyway, who's not looking to be trading every day, because a lot of it just isn't necessarily relevant. You think about, well, so-and-so, I don't know, Algeria bought, you know, 200,000 tons of wheat today.

Is that a decision-making tidbit that's going to go into it? You know, for most of us, probably not, and, you know, a very high percentage, probably not. So You know, and then I guess the other big thing there is, so we're reading these Daily Wires every day. We get the flavor, you know, from an individual. Are we reading those every day? How much time are we actually spending reading things that may or may not actually have an effect on our position? And then, you know, let's say that we get recommendations or different things that come up in those, and then that's the day we miss, and then we miss the whole thing altogether. So that's what we're trying to avoid is just getting inundated with information.

And I guess one thing I would key on too is we've chatted with individuals, it's like, "Well, I get wires from these 4 people so I can compare thoughts." And I think what that allows a guy to do is if you're not really diligent in how you consume that information, you can fall in the groove of getting confirmation bias and you just pick the one you like at that time, which is going to be most beneficial to you.

Shay

Foulk: Right. Well, and I think that information overload is so crucial. Like you said, the situation in Algeria or whatever's going on in Ukraine or, you know, conditions in Brazil, you know, what does that mean to me? And, you know, I think farm operations, I've been guilty of it in the past, and God bless my father-in-law, I love working with him. But, you know, he talks about, well, you know, it's dry in Brazil and corn prices are up, maybe I should sell some corn today. Well, you You know, what's your trigger there? What's your margin target? Do you truly have conditions in place to make those key decisions? And not everybody does. And I think what you're saying is, as you move into a new year, do you kind of need to reframe your marketing strategy? And maybe less is more, maybe we need less variables and harder, or hard and fast decisions that need to be made.

Is that kind of what I'm hearing you saying?

Garret

Brown: Well, that's exactly it. And so, you know, right before I would even get there, I would say, you know, what an opportunity to see where understanding your breakevens better than ever could be such a tool for confidence in marketing going into 2022 with the whole fertilizer situation, with increases in chemicals and that sort of thing. With where price is at, it just You know, there's been a lot of talk about inflation. I think honestly, more than inflation in the commodity markets, I'd almost call it like logistical inflation, to where it just feels like, you know, the farmer isn't able to— let's just say fertilizer— if they can make a good margin, it's just like, you know, let's just lock this up. Let's make the pain go away right now. Just done all that work, covered for next spring, no matter what happens. The ethanol plants, ethanol spot margins have been pretty good.

So, you know, we're up in the North Dakota market, we've seen really aggressive buying all the way through the curve here, basically into next summer. And if they're making good margins here, and especially in the spot market, you know, maybe perhaps I don't know exactly what they're thinking. But having been in that space myself, I'm wondering, you know, is it one of those things where it's like, you know, let's just get covered, let's just make sure we have the corn, you know, and who else in the environment is like that? We're seeing tenders like the Saudis had purchased for May through July, you know, don't tell anybody, but that's into the new crop window. For wheat market. You know, and obviously the wheat market's kind of fallen. We've seen international tenders come down a little bit there, at least for a time.

And kind of leading back to my logistical inflation standpoint, we just feel like we got to have it. If we can make it work, we do it. So again, going back to the breakeven analysis, but yeah, going to kind of the next topic with putting our marketing plan together. What can we do simply to really create that marketing plan so it can function but doesn't necessarily lock us in, you know, keeps us flexible, provides some, some guide rails, so to speak, to kind of decide, you know, how are we going to make decisions moving forward.

Shay

Foulk: So when you talk with a farm operation, I mean, you know, how much, how much depth and level of complexity do you need to understand about that operation to kind of help them with their goals and help them with their targets? Is it simple? Is it complicated? And the reason I'm asking this question is not specific to your services or what you do in the markets, but I think it's good perspective for the listeners here to understand that maybe your market stuff doesn't need to be as complicated as you make it, or maybe you do have too much information Or, you know, maybe you need to look at something different. Maybe you need more of a strategy than what you have in place because you're emotional. So, you know, when you're talking with a farm operation, what stuff do you need to know that really helps with some of the key decision-making to set them up for success?

Garret

Brown: You know, I mean, first thing is, who are the decision-makers on the farm? Who stands to benefit or to lose? Or, you know, however you want to look at that and make sure that those opinions are heard, that everybody's on the same page. And from there, kind of like I said, figuring out what's important. At what point can you find peace? Because at the end of the day, I mean, the markets move up and down all the time and you got to decide just how active you want to be. And what I'm seeing is more people want to get away from that. I mean, they want more time with family. It's like in the summertime, if they're not at the farm, a lot of times they might be at the lake. In the wintertime, might be in Arizona, might be out ice fishing. So there's definitely this kind of drive to find more of a work-life balance, I think.

And so with that, you know, I like to know things about their storage assets, what's their cost of production, and it just kind of helps to create that marketing plan. But let's just say that I was going to sit down with, with you and we were going to kind of go through and start putting together a marketing plan for you. What we've started to do here is, is to basically ask 6 questions. And what these questions are going to do is to help us determine, you know, what kind of a trigger we need to use. And this is to make decisions like, let's just say we're going to go out, we're going to make a sale, or we're going to, you know, have some reownership. And this is just kind of, I guess, as it says, it's a trigger to do something to try to achieve your goals. Then, and so one of those questions is going to be, you know, like asking, what's more important to you?

Is it going to be is it going to be maximizing revenue? Because I think at first a lot of us think, well, we're just here, we just want to make a good profit. But then we see that the market rallies and all of a sudden it's like, then we kind of switch to maximizing revenue. And it's like, well, the cows have kind of already got out if you already started to perform. So it's just trying to decide what are you really shooting for when you get started. And then the second thing is trying to decide, well, what's harder for you? So is it harder for you to sell when the market's going up knowing that, you know, that these prices might look cheap later on and that you're going to be missing out? Or is it harder to actually go out there and make a sale after the market's turned and it's pulled back, you know, 20, 30, or 50 cents or a dollar depending on what kind of a year we're having?

So, right, um, the, the interesting thing about that is really simple question Everybody can answer it, but I think most people are out there trying to maximize revenue. They're trying to get as much as they can, and just, we'll kind of file that away for a second. The second one is, I mean, my guess, 90% struggle to sell after that top has been in. At least that's from the discussions that I've had with a lot of different types of farmers. And so what that can kind of tell us is, oh, you know, because quite frankly, nobody can exactly predict the market. A lot of people poured a lot of money into that to try to do so, but a lot of it's just risk mitigation and determining what's the likelihood of something happening next.

But if you have a hard time selling when the market's turned around, it tells you that you need to find some type of an indicator that's going to tell you, hey, the market has historically kind of run its course when it's done X. And we need to be forward selling. We need to have something that says, hey, this trend, this market's going up. This trend could change, you better be ready to make a decision, or you better be making a decision. So, uh, but if you're on the other end, let's just say it really bugs you to have missed out on, on that, on that high, well, you might be looking for more of a confirmation indicator that says, hey, you know, the trend's changed, you know, we've gone up, now we're coming back down, you better make a sale. But then there's obviously things with that.

It's How much are you allowing that market to come back before you determine that, yep, this trend is definitely over? Because there's the whiplash effect. And you don't like— we've all had a situation where the market peaked, it came back, we made a sale, and then the market went back up again. It makes you think, well, I flinched, I shouldn't have done that.

Shay

Foulk: And I think, I think what you're saying too, or one thing that I hear you saying is, you know, the key here is execution and understanding what those are, what comfort level a producer has. And actually doing something with the information. Now, some people would rely more heavily on you or folks like you to help them make that decision, and some of them maybe with a little coaching and if they already have significant understanding of the markets, they might be comfortable in executing these strategies themselves. Of people that you work with, what's the split there, or how do you think about that when you're working with a farm operation?

Garret

Brown: Well, I mean, first off, our goal is not to work with more people than we can really get to know well, you know. And some people, they like to go out and trade on their own, and they like to have somewhat of an understanding of the rules that, you know, that we have, that we, you know, that we keep internally that are proprietary to us. But others are very reliant and just say, you know, they just want to know, they just want to know when to make a decision and that it, you know, it's grounded in logic, I guess. And so, you know, the way we do it is we've figured out indicators that kind of fit both sides of what I was just telling you, a forward-looking and a rearward-looking indicator. We've reviewed those over the, you know, say a 10-year period. And so over the last 10 years, let's say it's whether it's 2011 to 2020 or 2012 to 2021, You see a lot of different types of markets.

You see markets that just don't quit. They just, they just go up and up and up, you know, 2020, 2021, 2012, similar situation. You've seen other years where like '16, '17, '18, '19, where, you know, the market's largely just kind of chopped around, you know, in ranges. And, you know, if we can find indicators that have performed well across that whole span of time, then hopefully again, that can kind of provide us an edge to apply those concepts, those rules into the future. But again, there's still no guarantee that we're going to, you know, get a specific level of performance. But that comes back to what are we trying to achieve, having reasonable expectations, and then having those rules in place that says, well, if the market's going to do this, here's how I'm going to respond, or I'm not going to respond. So, right.

Shay

Foulk: I appreciate you kind of walking through this. You know, as we wrap up here, any last key things, you know, key questions that you're asking or things that a producer needs to be considering as they maybe look at making a change here for 2022?

Garret

Brown: You know, I think the thing just comes back to finding and declaring some reasonable goals and to make sure that those are measurable, you know, whatever those benchmarks are, that they are measurable. Define really what, what are we trying to achieve? Are we just, we're trying to be profitable? Are we trying to max out the market all the time? I mean, because quite frankly, most operations probably are not out there wanting to run a speculative hedge fund. That's not the business we're in. We're to try to be out there marketing the crops the best we can, get the best price we can, and then prepare for the next year's crop and enjoy all the stuff that happens in between. The next thing is just to me, find a consistent information source that you trust that does not always agree with you.

If you're a bull all the time, maybe you should find something that tends to lean a little bit more conservative. Or if you tend to sell too early every year, maybe you find something that tends to give you that balance. But at the end of the day, it's information you have to trust and it has to be objective. The third thing, Kind of just goes back to that cost of production. You know, the market doesn't necessarily care what your cost of production is, but I think it does a couple things. One, it just makes sure that you're on track with what those goals are as far as profitability goals. It helps give you confidence in your execution.

And then the final thing is just when you're putting your marketing plan together, kind of having consistent triggers, rules, that have worked in the past and, and just try to apply those going forward, and then just try to continue to improve those as you go along. And if, if you have no problem doing that, you have really good understanding, well then you maybe don't need anybody else. You know, if you're not trading any paper, even if you are trading paper, you might just be looking for really cheap execution services, clearing services, to get, get what you need, your adjustments done. But if you don't, if you don't have the time, then that's where it Makes sense to bring somebody in that you know and trust to help make those decisions and continue to try to be more profitable, I guess, going forward.

Shay

Foulk: Right. Well, that's the goal. And there is a lot of profitability on the table here in 2022. So, you know, I guess, you know, how I would kind of review some of these points from a consulting perspective and what we see with working with clients all over the place is, you know, on these goals, it's called a SMART goal, right? And you want it to be specific. You want it to be measurable, you want it to be attainable, you want it to be repeatable, and you want to have a time restraint on that. So understanding, you know, this is kind of where I need to be, this is when we need to be X percent sold, this is how much margin protection we need to have locked into place. So from a goal standpoint, I really like what you're saying on that.

And the second thing, drawing that line in the sand of, you know, understanding the key information, what your triggers are, what your execution strategy needs to be, We see this so often that simplicity can be the key to efficiency, and it takes so much of the emotion and the stress and the, well, what-ifs out of the equation by really dialing in what information is key. Obviously, your cost of production, that hits home. You know, that's what we work with on farm operations every single day. And, you know, yeah, you're right, the market doesn't care, but you need to care. You need to know what that margin target is. You need to understand when you're working with someone in the marketing space of, here's what my keys are, here's why my execution strategy is in place, because I have this margin target based off of my individual cost of production.

You can't use someone else's numbers, you can't use university numbers, you can't take averages, you need to know what that is for your farm. And then finally, you know, putting that marketing plan together, I think people, you know, maybe get a little overwhelmed with these marketing plans, because, well, things change, you know, corn could go to $6 or could drop back down to $3.80. And why am I going to spend time putting a marketing plan together. The best farm operations that we work with have a marketing plan. You know, they're not just winging it. They've been successful because they have some sort of strategy in place, and they're always looking at, you know, what else do I need to be considering? Do I need to work with someone like Garret? Do I need to, you know, get some different perspective?

Like you said, if I'm a bull, you know, consistently, do I need to find someone that's maybe a little bit more bearish in the market? So I love these key points. And more importantly, Garret, I'm happy to have this conversation because I do think we need to maybe reframe how we think about these things as we move into 2022. And I highly encourage listeners to take these things into consideration. So any last thoughts here, Garret?

Garret

Brown: Yeah. I mean, with that last little bit, Talking about simplicity, I mean, you know, we're— I'm more than willing to, you know, share with the spreadsheet that we're using with some of our clients here going forward. I mean, it contains 3 really simple parts of it. The first part, farm profile, it's just the basic farm information that everybody figures out anyways. Things like, here's the acres, here's what I have for storage, anticipated yield, all that sort of thing, breakeven, would take you almost no time at all. The second part is just declaring it. I call it my kind of like my hedging parameters or my sales parameters. It just says, here's the rules that I'm going to use to define when I need to make a sale. And it's, you know, for me, it's more technical-based, but maybe for somebody else, it's profitability.

The second part of that is the method I mentioned, which is essentially, are you trading any paper? Are you entirely going to be with, you know, physical contracts. And that's one of those things in that little questionnaire that we do with our clients that just defines if they're not comfortable with margin at any level, well then you know exactly what tools to use. And then the final thing is the volume. How do you determine what kind of volume that you're going to sell? And having— so that's all in there on that marketing plan. And the final thing, which is kind of the delivery windows that we need to hit, and that comes back to storage capacity and, you know, the risk assessment that we have on ourselves, how much risk we're willing to take. And like I said, I'm willing to share that with you. It's not necessarily— that part isn't really proprietary.

It's because at the end of the day, what's going to separate every part is how well they define those goals and how well they're willing to execute those. What are the rules are they actually going to have? And that's where a lot of the work actually comes in.

Shay

Foulk: Great. Well, and if they want to reach out to you on that spreadsheet, I love being able to have sender tools or to have something in front of you. You know, even if, even if it doesn't get sent back necessarily, of just understanding, hey, here's, here's some ways I need to think about this, uh, how would they go about getting that from you, Garret?

Garret

Brown: Sure. Well, I mean, you could just, you know, shoot me an email, uh, it's gbrown@codaxgroup.com. That's Codax with a C, um, or just give me a call, uh, number is 701-521-0055. That's my cell number, um, no spammers please, but, uh, No, it's really, like I said, it's really quite simple. It's what you want to do after the fact. I think it can bring value to people, I guess, just realizing that, you know, this can be that simple, you know, and going back to those goals. If they're simple, if they're measurable, attainable, exactly, exactly. This doesn't have to be Impossible, I guess. And I just remember talking to you about a year ago here, we were really starting this rally and everybody was— we were all kind of upset that we had sold too early.

It kind of goes back to, you kind of have to figure what can you let go and what do you have to try to change later on and what can you change? So that kind of comes into that marketing plan and how we create and generate those goals.

Shay

Foulk: Fantastic. Well, Garret, thank you so much for making the time. I really appreciate it. And one thing I would encourage too is whether it's marketing perspective, business planning, whatever else you maybe have as some of your key goals in 2022 here, you mentioned some people like to have a little bit more time away, maybe spend some time in Arizona in the winter. And I would be remiss if I didn't mention the conference that we have coming up here in Phoenix, Arizona. It's going to be a great event, January 26th, 27th, and 28th. Operations from over 15 different states. A lot of variability, diversification represented. Great operations there. So if anybody listening to the podcast is interested in that, please go to agviewsolutions.com, click on the conference tab at the top, and be sure to get registered. Garret, thank you so much for joining us today. Really appreciate it.

Garret

Brown: You bet, Jay. Thanks for having me on.

Shay

Foulk: And thank you everyone for listening. We will catch you next time on the Ag View Pitch.