Nov 8, 2018
THE CHALLENGES OF BUSINESS
Whether it’s manufacturing, retail, the service industry or
agriculture—there is something that makes you feel like your
business is tougher than others. For farmers, typically a major
source of frustration is found in the grain marketing side of the
business. That’s understandable because farming—and in particular
the marketing aspect—work differently from most other
THREE BASICS OF EVERY BUSINESS: MAKE - SELL -
Make: If you’re in the widget business, the
first step is to make widgets. Dry cleaners make clean clothes.
Farmers make grains, produce & livestock.
Sell: The widget maker uses ads to create buzz
in the marketplace, focusing on increasing the perceived value of
the widgets they manufacture, This is how they create customers.
This is not how commodity marketing works, where the items up for
sale are considered “fungible,” meaning the market doesn’t care
where it came from or who grew it—all corn fetches the same
- Long-term winnings come to the most efficient producers (Outrun
the slowest guy, not the bear)
- Differences in price happen through time rather than from
difference between producers (The quality of the product doesn’t
change--just its perceived value)
Count: Inventory, bookkeeping, tax prep,
SELLING: SEVEN BENEFICIAL CONTRARIAN
- Uncertainty equals opportunity: Moving markets provide
uncertainty that keeps production costs down. A three-year long
20-cent trading range means the market gets very comfortable with
what costs can do, but a more wildly fluctuating price, though
potentially quite emotional, means opportunity to sell during peaks
and added pressure to cost structure because of that
- Work on the other end of the leash: Most dog trainers will tell
you their best work happens here. They can work with the dog, but
what matters most to long-term behavior is tied to the owner. In
farming, the two ends of the leash are marketing and efficiency. We
might be tempted to focus a lot of energy on the “dog end” of the
leash (the markets), but if the trainer is giving mixed signals or
reinforcing bad behavior (or the farm leader is not concentrating
on the efficiency of the operation) then the dog won’t behave
properly for long (we’ll find we can’t market ourselves out of a
- Remember the goal: Selling what we’ve raised can bring a lot of
emotion into the picture—anger at pricing, regret for not having
done something, paralyzed in fear due to the uncertainty—but we
need to remember the purpose of marketing: to turn our production
into cash. Be clear, intentional & focused.
- Even Tiger has a coach: Top performers have coaches to provide
feedback, offer a different perspective, apply principles to fit
the performer’s needs. What does a farmer need to find in a coach?
A credible person you connect with and have a relationship of
respect and candor. They can be professional-level coaches with
expertise in market planning and implementation; they can be
informal, like a friend or uncle with a real knack for insight or
- Ready, steady, GO: Get clear on what to do next. “I’ll sell a
good chunk when the market gets high enough” is way too vague. How
much? How and where will you price it? At what level? Detail allows
you to be patient and pounce when the well-defined time is
- Pass me the gravy: Commodity marketers are price takers, which
can lead us into a trap of complacency and helplessness. The
“gravy” is the little things that we can do to add value without
adding much or any cost: growing seed, specialty traits, having
access to end-users who are willing to pay more. Gravy goes right
to the bottom line, and once enough gravy goes into equity it
starts to make a real difference.
- Finish the learning loop: Don’t make a decision or take an
action without viewing it as a learning opportunity. We only have
about 40 chances to market our crop, and if we aren’t active
learners who look for patterns, biases and ways to improve next
time around—we’re doomed to relive our rookie year 40 times.
Becoming comfortable with uncertainty, working on efficiency,
focusing on what we really want, having good coaches, building
plans and watching for opportunities--these all help with continued
learning and focusing on our own development.
Note: There is significant
risk of loss involved in commodity futures and options trading, and
they may not be suitable for all investors.
Thanks for listening! Email me any questions or comments at
firstname.lastname@example.org. See you next week!