“Marketing isn’t the act of selling, it’s the act of knowing,” says Jerry Bouma of Toma & Bouma Management Consultants, Edmonton. “That includes understanding the markets — and your own strategies.”
It’s a mouthful, but the pros say it’s realistic.
Setting acceptable prices may not be easy and it may not seem like fun. But don’t tell that to Frank Backx from Hensall District Co-operative in southwestern Ontario. He doesn’t listen to excuses. Says Backx: “Target prices are absolutely critical to success.
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“Markets may not always go there, but with the type of volatility lately, most reasonable targets have been getting hit,” says Backx, who suggests setting forward contract objectives, such as 10 and then 20 per cent over a conservative cost of production.
Mark Lepp, owner of FarmLink Marketing Solutions in Winnipeg, says a marketing plan is imperative for long-term success. “The most successful marketers we encounter have a very in-depth knowledge of their farming operation,” Lepp says. “That includes all of the internal dynamics of it and how each relates to the commodity markets they’re selling into.”
FarmLink writes marketing plans for its farm clients based on each crop’s cost of production, break-even price level and storage constraints, plus the farm’s cash flow needs, personal risk tolerance, profit margin targets and other long-term business goals.
In contrast to the roller-coaster nature of commodity markets, the key issues that any individual farmer faces are usually quite static, Lepp says. That makes it possible to manage, review and revise strategies as market conditions change, ensuring the smartest decisions for the business.
Sellers who have goals for the year and a marketing plan have a real advantage, says Linda Feltz, purchasing manager for Wallenstein Feed and Supply Ltd., a feed mill north of Guelph, Ont. “They know what their costs are” Feltz says. “They’ve pencilled out their costs and when corn hits a certain price, they execute.”
Budget-based selling
Ken Motiuk grows almost 6,000 acres of field peas, canola and CPS and HR wheat at Mundare, Alta., an hour east of Edmonton. At 55, Motiuk is starting to think about retirement — he even has a pact with his wife to go on holidays every winter — and he’s preparing the farm for succession by expanding and by training his son-in-law Justin.
The key to Motiuk’s marketing is discipline.
“First of all, you need a good plan of what you’re doing, where you’re going and how you’re going to structure this thing,” says Motiuk. His business plan lays out the farm’s structure and defines its principles of operation, including succession, labour strategies and business targets. Also rising out of that business plan are the numbers — including one-, two-and three-year expense budgets.
Based on these expense budgets, Motiuk knows his break-even numbers and his cash flow needs for the year. “We live very much by our budgets,” Motiuk says. “As marketing opportunities come in that meet the budget, I’ll start to sell.”
Motiuk learned about market options while attaining his bachelor of science in agricultural economics from the University of Alberta, but he focuses on keeping current, and he invests in market watching. “I spend a lot of time reading newsletters and keeping up with the market,” says Motiuk.
He subscribes to the daily Pro Market newsletter that he reads on his BlackBerry. “Whether I’m on the golf course, in Peru or on the tractor, I can get that newsletter every day,” Motiuk says.
Business plan drives marketing
Ian Lepp farms about 5,000 acres at Elm Creek, Man. with his father Harry, brother Daniel and uncle Bill. It’s a diversified cropping operation. This year, they seeded six crops — spring and winter wheat, canola, soybeans, oats and perennial ryegrass — and in other years they’ve planted corn and sunflowers.
The Lepps created their own business and marketing plan, and with the help of a farm financial adviser developed a succession plan for the operation. Because the farm is in the midst of transitioning between generations, it looks closely at debt-to-equity and current ratios.
In order to meet their goals for these ratios and for the overall business, the Lepps’ marketing plan includes profit targets.
“You want to see your business improve, so we try to use some benchmarks and ratios,” says Lepp, who just turned 26. “Having hard numbers helps you set goals so you’re not just throwing numbers around.”
Lepp writes down cost breakdowns for each crop a year ahead. He starts with the more stable fixed costs and then tries to budget for some changes in variable costs, a big challenge in 2009.
After he calculates their break-even points, Lepp decides how much margin to build into the target selling price.
The overriding objective of Lepp’s marketing strategy is to lock in profit when the opportunity arises. He may not always get the top price for their crops but it gives him a solid foundation to plan with certainty.
