Experience... the Difference!
AUGUST 2016
FirstSource for news about First Dakota’s COMMITMENT TO AGRICULTURE
AGRIVISIONS NEWSLETTER
®
DO YOU HAVE A PLAN?
BY NATE FRANZEN, AGRI-BUSINESS DIVISION PRESIDENT
This very general question may have you thinking about many things. Am I referring
to an estate plan, a transition plan, a strategic plan, a financial plan, a crop plan, a
feed ration plan, a grazing plan, or maybe a capital expenditure plan? All of these are
important areas to have a plan! However, in this case, I’m not talking about any of
those plans. I’m referring to a plan that I believe will make all the difference for farmers
and ranchers the next few years, a “Marketing Plan.” We are in a time in production
agriculture where profits will be hard to come by. I firmly believe producers with a strong marketing plan
and the discipline to follow it will financially out perform everyone else.
So what does it take to have a strong marketing plan? First and foremost, it takes a strong financial record
keeping system. You might be thinking, “What does that have to do with where the markets are going?”
The answer is nothing at all. Strong marketers don’t try and predict where the market is going. They know
that nobody knows where the markets are going. If they did, they’d be a billionaire drinking fruity drinks
on a beach in the Caribbean. Good marketers know they must first know their cost of production. In other
words, what is the break even by crop or by livestock species? Far too often I visit with producers who think
they know their cost of production, but when we take a close look they really don’t. Cost of production
must factor in everything. Many know their variable costs. Costs like seed, chemical and fertilizer. However,
far too often we see break even calculations that don’t factor in all fixed costs. They might have land costs
but often not family living or accurate machinery and equipment costs. To really know all your costs you
must have a strong record keeping system that incorporates enterprise analysis. Once you have accurate
cost of production information you are ready to establish your marketing plan. Without cost of production
information, you are marketing in the blind. With it, you know what level of price you need for your grain
and livestock inventories to be profitable.
Another pitfall we often see in marketing plans is profit expectations that are too high or unrealistic,
especially in tighter margin environments like today. Set reasonable profit goals and do something when
the market offers pricing opportunities at those levels. Don’t get caught trying to hit the top of the market.
Stay focused on pricing inventories at profitable levels. You can’t go broke making money!
From there it comes down to price level targets and deadlines. Deadlines are to keep you from doing
nothing. Unfortunately, some years the market doesn’t offer us prices at your profit targets. Remember,
the market doesn’t care what you need to be profitable. The good news is most years the markets will give
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FirstDakotaAg.com
DO YOU HAVE A PLAN? - CONTINUED...
you an opportunity for profits. This is where market volatility is your friend. More volatility means more
movement in the markets which often means more opportunities to price at a profit. Once you have set
your price targets at reasonable profit levels and set deadlines on the calendar, you are well on your way
to a systematic approach to selling inventory. One that holds you accountable and motivates you to sell
something when deadlines or market levels indicate you should.
There are many good reasons to have a defined marketing plan. The biggest is it will remove some of
the emotion from your marketing decisions. Emotion is not your friend when it comes to marketing.
You want to remove the emotion and execute based on your plan. Far too often I see producers get
emotional during rallies or downturns in the markets. These emotions paralyze you into doing nothing
or scare you into removing prior sales decisions. Most often, neither of these scenarios are good for you
in the end. Remove the emotion and price inventory when your plan tells you to do so. Try not to look
back on prior sales decisions. Always look forward.
The last area of caution in the marketing of your inventories is how you do it? There are many tools for
producers to market inventory. Some examples include futures positions, puts, calls, and many different
types of direct contracts. My caution to you is to always be sure you thoroughly understand the tools you
use to price your inventory. We have a saying in the banking industry, “Never lend money to a business
you don’t understand.” The same is true for you when it comes to marketing, “Never use marketing tools
you don’t understand.”
As we look to the future, educate yourself on marketing tools; know your cost of production, set pricing
targets at reasonable profit levels, and set deadlines to keep you from doing nothing. If you do these
things you will be a better marketer! At First Dakota, we realize marketing can be very difficult. We also
know those that approach it with a systematic and well informed plan will always perform better over
the long term. We wish you the best and look forward to the opportunity to serve your banking needs!
AGRIVISIONS
Coming in January
2017
®
Dr. Matt C. Roberts
When it comes to the markets, Dr. Roberts
is an active researcher, consultant, talking
head, and has been quoted in The Economist,
Wall Street Journal, and Forbes, as well as
appeared on CNBC and is a frequent contributor
to AgDay TV. Matt also teaches at Ohio State.
He is the Ohio State University Extension
Grain Marketing Specialist and is a board
member of the Ohio Corn and Wheat Growers
Association. Dr. Roberts is also a partner in
Vertical Adventures, Ohio’s largest indoor
rock climbing gym, and a Director of USA
Climbing, the national governing board of
competition climbing in the US.
Write your perfect legacy.
Let our Legacy Consultants help you with
strategic planning, best business practices
and estate planning.
ALAN HOJER
BRYAN FRANSEN
[email protected]
605.270.1684
[email protected]
507.227.1828
DANCI BAKER
DON KETTERING
LEGACY CONSULTANT
LEGACY CONSULTANT
[email protected]
605.222.0516
LEGACY CONSULTANT
LEGACY CONSULTANT
[email protected]
605.660.4303
First Dakota - Booth 223
August 16 - 18, 2016
Schlaffman Farm | 2300 Spruce Street
Mitchell, SD 57301
The key to your future is to lock in rates now.
Here are a few questions to think about.
• Is your balance sheet out of balance?
• Has your cash flow and working capital been stressed by current commodity prices?
• Do you wish your bank offered a 30-year fixed rate loan?
Although we aren’t able to predict how long interest rates will stay low, uncertain times are a
great time to protect your bottom line and secure low long-term ag real estate interest rates.
This can also improve your working capital and cash flow. Our 15, 20 and 30 year fixed rate
loans are some of the best long-term ag real estate loans in the business.
Call your First Dakota Ag Banker today to learn more.
AGRIVISIONS
2017
Growing American Farmers and RanchersSM
®
BEGINNING FARMER PROGRAM
NOW ACCEPTING APPLICATIONS
The key objective of the Growing American Farmers and Ranchers® AgriVisions® Beginning Farmer Program
is to educate and provide leadership to expand the opportunities available in agriculture. By taking part in
this program you will learn new skills, make new friends, and yes, get your brain jump started.
As a participant, you will:
• Expand your knowledge of the Ag industry
• Expand your knowledge of capital, break evens, marketing, and aspects of financing
• Grow a stronger appreciation and understanding of the resources in Agriculture
• Enhance your self-confidence, personal development, responsibility and leadership skills
• Appreciate the need to be a life-long learner in Agriculture
• Network with other farmers, ranchers, and industry leaders around the area
First Dakota Convenient Locations
PRSRT STD
US POSTAGE
PAID
In South Dakota…
Beresford605-763-2135
Blunt605-962-6231
Chamberlain605-734-5555
Elk Point 605-356-0289
Kimball605-778-6218
Mitchell (North)
605-996-3364
Mitchell (Norway)
605-996-3364
Oacoma605-234-5005
Parkston605-928-3077
Pierre605-224-5817
Salem605-425-3111
Sioux Falls (Downtown)
605-333-8200
Sioux Falls (Louise)
605-333-8295
Sioux Falls (East)
605-333-8282
Vermillion605-624-5555
Wagner605-384-5456
Yankton (Downtown)
605-665-7432
Yankton (North)
605-665-4999
225 Cedar Street
PO Box 156
Yankton, SD 57078
Yankton SD
57078
Permit No. 16
ADDRESS SERVICE REQUESTED
Loan Production Offices
Columbus, NE402-563-2326
Corsica, SD605-946-5888
Hastings, NE402-463-4637
Ogallala, NE308-284-3260
Platte, SD605-337-2154
Watertown, SD
605-753-5880
F I R S T D A KO TA N AT I O N A L B A N K
AG ADVISORY BOARD SPOTLIGHT
Meet Jim Aden - Gothenburg, NE - Aden Diversified Ag
Jim returned to the family farm in Gothenburg in 1991, after pursuing a flying career for a
couple of years. When Jim returned, he worked aggressively with his father to build their
cattle and crop operation. Their operation grew from 1,100 acres to their current operation
of 7,000 acres. They grow mostly yellow and white food grade corn for Frito-Lay, with the
remaining acres being hay and soybeans.
Jim has Bachelor of Science degrees in Airway Science and Business Management. He was
awarded the Frito-Lay North America Grower of the Year in 2004, and was also a finalist in
the Nebraska Young Farmer of the Year. Jim gives back to his community and profession. He
has served on the Gothenburg Airport Authority, Gothenburg Improvement Company board
member, Gothenburg City Council and the American Lutheran Church Council. Jim enjoys
golfing, flying, and motorcycles.
Meet Pam Geppert - Kimball, SD - Dakota Farm Talk Radio
Pam has lived and worked on the family farm her entire life. In 1990, she started Dakota Farm
Talk radio program which provides radio media reports for seven ag organizations in South
Dakota. Prior to 1990, she worked for WOWO radio in Fort Wayne, Indiana. She is a member
of the National Association of Farm Broadcasters. In 2011, she was awarded the media award
from the South Dakota Pork Council.
Pam has a Bachelor of Science degree in Ag Journalism from South Dakota State University.
She is also a graduate of the first class of the SDARL (South Dakota Ag and Rural Leadership)
program in 2002. Pam is very involved in her community and in agriculture. She currently
serves on the South Dakota State Fair Board and the Mitchell Technical Institute Ag Advisory
Board. She has served as a 4-H leader along with being part of the Brule County 4-H Leaders
Association. She served on the Kimball Community Foundation and has served as president
of the Kimball Area Horizons Board.
Additional Ag Advisory Board Members include: Todd Bushong, Dr. Barry Dunn, Steve Eichacker, Dan Eisenbraun,
Bill Even, Terri Funk, Chad Heckathorn, Cody Jorgensen, Larry Klumb, Craig Schaunaman and Jim Woster.