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FARMERS' CORNER | |||
| "To Help The Producer Sell Better" | November 1996 1996 Number 10 |
|
FARMERS' CORNER | |||
| "To Help The Producer Sell Better" | November 1996 1996 Number 10 |
Index - November 1996
"First we form habits, then they form us." ----Dr. Rob Gilbert
Force of Habit
Some people put on one sock and then a shoe, and then the other sock and the other shoe. Others put on both socks first, then both shoes.
Most of us have a routine that we follow when we get home from work; some people sit down to read the paper, some go to the refrigerator for a snack, some start straightening up the house. Whatever it is, most of us do the same things in the same order every time we come in the door.
Why do we do things the way that we do? In many cases, we probably can't say for sure. If someone asks us, we'll most likely answer, "That's just the way I do things."
Human beings are creatures of habit. Most of us will do certain things the same way our entire lives. Whether the reasons we do things the way we do are good or not (or whether we really have any reason at all), we form habits. Once habits are formed, they can be very difficult to change.
Our first impression of the word "habit" is a negative one, but that is not always the case. Our habits can be good for us if they are the right ones.
We all know people who have a habit of saving money. They started socking away money at some point, and now it's just second nature to them. One of the first things they do when they get a check is run down to the bank and put part of it in their savings account. When they first started saving, they probably had a specific reason; maybe the wanted to buy a house, or take a vacation, or go to college. Now, saving money is a habit for them. They do it automatically, and it would be hard for them to stop.
Our habits can be our best friends, or our worst enemies. That's entirely up to each one of us to decide. Once we realize that we are going to form habits, and that those habits will to some degree determine the course of our lives, it is up to each one of us to decide whether or not we will work on forming habits that will be helpful to us.
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Elbert Hubbard said it best: "Cultivate only the habits that you are willing should master you." Good habits will take you far, and bad habits will hold you back. This is true of every aspect of life, but let's look specifically at some habits related to farm marketing.
If it's true that your habits impact the outcome of your entire life, it's also true that your farm marketing habits will impact the success of your farming business. Bad marketing habits will bring poor results, and good marketing habits will bring success.
The following paragraphs will examine several marketing habits that will help you become more successful. Take a close look at these habits, and see whether the habits you have developed are helpful or harmful to you and your business.
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Habits of Successful Farm Marketers
Habit #1 -- Look at the big picture
Farming is not a short-term business--it's a lifetime endeavor. The overall success of your farming efforts will not be determined by any one year or by any particular instance of selling for a great price.
Each year, each harvest, is one brick in the structure of a successful lifetime of farming. If looking at the big picture becomes a habit, you will find that you are not easily caught up in emotional turmoil that can cloud your mind and cause you to make bad decisions.
Habit #2 -- Focus on profit, not price
In farming, like in any business, selling at a profit is the main focus. Unlike other businesses, though, farmers have to choose between a number of selling prices.
In almost every other manufacturing business, the person who produces a good determines the cost of production, decides on a reasonable profit margin, and sells at that price. Farmers, on the other hand, have the freedom to choose from many different prices. One crop can be worth a widely varied amount from the time it is planted to the time it is sold. This can make it very difficult for any farmer to keep his eyes on the goal.
If you make a habit of determining costs of production, settling on a profit margin, and selling as soon as that margin is reached, you can be sure that you will make a profit consistently. After you have a developed a habit of selling at a certain profit level, you will be much less likely to be distracted by movements in price.
Habit #3 -- Sell whenever your desired profit becomes available
On many occasions, the price that will allow you to reach your desired profit margin on a crop becomes available well before the crop is harvested, and sometimes even before it is planted.
You can make it easy to sell at these early profitable prices by putting in a target order after you have figured your costs of production and decided on a profit goal. If you enter a target order well before harvest, you won't have to worry about watching the market. When your price becomes available, your grain will automatically be sold on a forward contract. You can even do this for more than one year at a time!
At first, the decision to sell a crop that isn't finished growing yet (or that hasn't even been planted yet) can be a difficult one. However, as you begin to sell as soon as your target is reached on a regular basis, it will become a habit and be second nature to you. Every year you will figure your production costs, enter a target order, and then just wait for your profit margin to become available.
Habit #4 -- Manage the Future, Don't Worry About the Past
It can be very easy to lose focus and start concentrating on the past, especially when the past includes as much price volatility and emotional uproar as the last eighteen months have had.
The past is over; it cannot be changed, it will not get any better or any worse, and no amount of wishing will make it go away or come back.
The past cannot be managed, but the future can. Concentrating on the past is a habit that can be very damaging to your success in farming. Whatever happened last year or last week cannot be changed. You can, however, make a very real difference in what will happen to you from now on. A habit of always focusing on the future will help you achieve a greater level of success in business and in life than living in the past will.
A Long Row to Hoe
Talking about changing habits is the easy part. Actually changing them will take some hard work and commitment. Whether it is how you put on your shoes or how you sell your grain, if you have been doing things a certain way for a long time, then you feel comfortable doing them that way, and changing old habits is not easy.
Whether or not is in your best interests to change your marketing habits is up to you. Take a careful look at the habits on the previous page. These habits will greatly aid your success. Do any of them sound like you?
Changing your habits from ones that hold you back to ones that help you move forward is a difficult process, but the rewards that will come as a result of it will be worth the trouble.
There are two steps involved in changing habits. The first is self-examination. Take a close, honest look at the way you market your grain. What are your reasons for doing it the way that you do? Do your habits help you or hold you back? Pinpoint the habits that you would like to change.
Now comes the hard part. The only way to get rid of a bad habit and build a good one is to start doing things differently. This means stepping out of the comfort zone and trying something new.
Do you always put your grain in storage at harvest? If the price that is available is sufficient to cover your costs and give you a reasonable profit, why not sell, or at least sell on a Minimum Price Contract? You will save money, lock in a profitable price, and eliminate risk of lower prices. Plus, you will be making a first step toward better marketing habits! As you begin to do this more and more, you will be overcoming your habits and replacing them with new ones. After a while, it will be second nature to you to always sell at a profit. As you stay focused on the long term, you will see your situation begin to improve.
Eventually, these new ways of marketing will become new habits.
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Minimum Price at Harvest:
A Habit that Makes Sense
A lot of people are in the habit of putting their grain in storage at harvest if the price isn't where they want it to be. This is a highly respected marketing practice in some places, and people are just used to doing it. However, when examined closely, storage and/or DP seem to have more things going against them than for them.
1. The "Marketing Meter" is ticking
Once the grain is out of the ground and into the bin, the ol' "marketing meter" starts ticking away. Now, grain that is supposed to be making you money starts costing you money. Storage fees, shrinkage, interest, and other costs start eating up your profits. Even if you do get a little more for your grain, after you look at what you paid to wait for that higher price, the overall profit may not be as much as you thought it was.2. Risk of lower prices
While the goal of storing grain is to wait for a higher price, you have no guarantee that the price will go higher, or even stay where it is.You have absolutely no protection if the price should go lower.Eventually, you'll have to take whatever the market will give you. It may be higher, lower, or the same.If you are considering storing grain this harvest, or if you have already put grain in storage, you should consider a Minimum Price Contract as an alternative. With a Minimum Price Contract, you get a check for the current market price when you deliver, plus you have the chance to get higher prices if the market goes up after you sell.
With Minimum Price, you completely eliminate any downside risk. No matter what happens in the market, you have already locked in a profitable price. You truly have the best of both worlds. If the market goes up, you receive more; if it goes down, you won't be affected because you've already sold at a profitable price. All this for a price that's very competitive with storage or DP costs.
Please come in to discuss this with us further.
Give Thanks...
Thanksgiving is just a few weeks away. What a wonderful time of year--families are getting together, enjoying time with each other, and taking a little time off from the hustle and bustle of everyday life. Every year about this time, most of us take a moment or two to think of all the things we have to be thankful for--and what a list it is!
We live in the best country in the world. Every one of us is a free person; free to go as far as our dreams and our determination can take us. Our only boundaries are the ones that we impose on ourselves.
As a farmer, you have the good fortune of having one of the most truly worthwhile occupations of all. People all over the world will enjoy Thanksgiving dinner with their families this year because of the hard work and dedication of farmers like you.
We are thankful for the opportunity to work with you, and we would like you to know that we are dedicated to helping you reach your goals. Thank you for your business and may this Thanksgiving find you with many things to be thankful for.