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Executive Marketing: Developing a Marketing Plan

Executive Marketing: Developing a Marketing Plan. Scott A. Mickey. Seminar Purpose. Develop a written marketing plan based on producer’s financial needs Operating costs Cash flow requirements Planting intentions . Seminar Topics & Tools. How Healthy is your Business Fundamental Analysis

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Executive Marketing: Developing a Marketing Plan

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  1. Executive Marketing:Developing a Marketing Plan Scott A. Mickey 2005 RME - Executive Marketing

  2. Seminar Purpose • Develop a written marketing plan based on producer’s financial needs • Operating costs • Cash flow requirements • Planting intentions 2005 RME - Executive Marketing

  3. Seminar Topics & Tools • How Healthy is your Business • Fundamental Analysis • Comparing Crop Insurance Products • Marketing Simulation Game • Target Price Analysis • Putting the Plan on Paper • Quarterly Updates 2005 RME - Executive Marketing

  4. How Healthy is Your Business • Assess the financial condition of the business • Recent Balance Sheet 2005 RME - Executive Marketing

  5. 2005 RME - Executive Marketing

  6. Assessing Financial Position • What is the ratio telling us? • How has it changed from last year? • Will it impact marketing decisions? 2005 RME - Executive Marketing

  7. Fundamental Analysis • Where prices may go • When 2005 RME - Executive Marketing

  8. Fundamental Analysis • Project Ending Stocks • Estimate US average cash price • Add average US basis to cash price • Determines expected Futures price • Adjust to HARVEST futures price • Evaluate years with similar ending stocks 2005 RME - Executive Marketing

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  10. Fundamental Analysis:Projecting Pricing Opportunities 2005 RME - Executive Marketing

  11. Fundamental Analysis: Projecting Pricing Opportunities 2005 RME - Executive Marketing

  12. Crop Insurance • Understand available products • Production guarantees • Revenue guarantees • Use CRC for Market Trades 2005 RME - Executive Marketing

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  15. Crop Insurance - • Comments • Is CRC a better way to go? • What about the price in between the base period and harvest period? 2005 RME - Executive Marketing

  16. Coulda 2005 RME - Executive Marketing

  17. Marketing Simulation Game • Dr. Art Barnaby’s corn trading game • S/D reports • Futures / Options / Cash • Crop Insurance • Review of price enhancement strategies 2005 RME - Executive Marketing

  18. Target Price Analysis • Discover “successful” prices • Target = OP + Extra • B/E = OP • Cash Flow = OP - WC • Use producer’s actual crop budgets 2005 RME - Executive Marketing

  19. Setting Commodity Target Prices • Step 1--Determine operating profit requirements • Interest • + Family living & taxes • + Principal payments • = MINIMUM OPERATING PROFIT • + Allowance for new assets & uncertainty • = OPERATING PROFIT GOAL 2005 RME - Executive Marketing

  20. FLOID Family Living & taxes Operating expenses Interest Debt (principal) 2005 RME - Executive Marketing

  21. Calculate Operating Profit 2005 RME - Executive Marketing

  22. Setting Commodity Target Prices Step 2--Calculate TARGET prices. * Covers FLOID + Uncertainty Operating Cost + Operating Profit Goal = Calculated Gross Revenue - Non-Crop Revenue = Crop Revenue Required / Expected Yield = TARGET PRICE 2005 RME - Executive Marketing

  23. Calculate Target Price 2005 RME - Executive Marketing

  24. Putting the Plan on Paper • When • How • What • Quarterly Updates 2005 RME - Executive Marketing

  25. Executive Marketing: UpdateAcreage Report 6/30/04 • General Comments • These comments apply to the July/August time period. • The FLOID price covers Family Living, Operating expenses, Interest and Debt. The FLOID price results in no change in net worth. • The “Duck” price covers all of “FLOID” plus a 25% cushion. A Duck price increases net worth. • Assess your “FLOID + Duck” price relative to market. If you can achieve this price level, use futures or cash forward contracts. • Assess your “FLOID” or breakeven price relative to market. Try to achieve this price level using put options. This will protect family living and debt service needs while leaving the upside open. • Corn – CZ04 • Comments: • Dec 04 & 05 are both in top 1/3 of historical prices. • Historical high yields needed on increased acres to maintain current Ending Stocks. • A decrease in yield could be explosive. • Chart gaps DOWNSIDE @ 2.58, UPSIDE @ 2.72, 3.05 • Actions: • If no crop is priced, get to 50% priced now. • Price in September or December based on your storage situation and risk tolerance. 2005 RME - Executive Marketing

  26. Hope is much more than a mood. It involves a commitment to action…What we hope for should be what we are prepared to work for and so bring about, as far as the power lies in us. John Polkinghorne, physicist, Anglican priest and author of The God of Hope and the End of the World

  27. Thank You! Scott Mickey smickey@clemson.edu PO Box 237 Sumter, SC 29151 803 775-4580 800 881-7518 fax 2005 RME - Executive Marketing

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