What Is the Process?
In the production of agriculture commodities like livestock, grains, fruits and vegetables, weather plays an important role. In mineral commodities like precious metals and industrial raw materials, labor and mine conditions affect production. The key to profits often lies in strategies that lock in future prices and manage output.
Commercial Producer In the commodities market, the term "commercial producer" refers to companies that raise or produce agricultural, mined or manufactured commodities, such as steel, for sale into the marketplace.
This differentiates them from "commercial consumers," who are the buyers of these commodities.
Successful commercial production of commodities involves annually matching production to market demand and using tools like forward contracts to sell at a specified price.
Forward contracts allow the producer to control revenue flow and insure against the negative effects of over-supply and market volatility on product prices.
Strategic Business Planning If you are commercial producer, your strategic business planning has three goals: Commodity demand is often seasonal. Your agricultural commodities can be sold into the domestic market or shipped overseas to fulfill off-season demand.
Your exposure to risk includes growing conditions, currency fluctuation, geopolitical and economic conditions. Industrial commodities like mineral raw materials and steel also have seasonal demand.
If you produce steel or minerals used for industrial applications, many industries like the automobile industry have a production season when they build their products and a selling season when they sell those products.
If you export your production, you face risk from geopolitical conditions, as well as commodity and currency market volatility. Strategic Risk Management Event risks you face include labor disputes, machinery breakdowns, injuries and geopolitical strife.
Control the effects of these risks with the various kinds of insurance. A commercial insurance agent can suggest various ways to structure your particular risk management approach. Control the risk of market price fluctuations in your commodity, or fluctuations in the currencies of countries where you ship, by hedging with futures contracts to lock in prices.
Interest rates affect your financing costs, so they are another risk factor each season.
Again, hedging with futures and options on Treasury securities can help mitigate Federal Reserve intervention or market-based rises in interest rates. Your securities broker should be able to help you with the appropriate hedging strategies. Once your risk management is in place, the rest of your strategic planning can be accomplished.
Marketing and Operations Hedging is a way to control short-term risks but the rest of your strategic planning activities generally focus on longer-range goals such as expansion of your operations, adding additional revenue streams, updating your equipment or improving shipping arrangements.
Depending on whether you sell your production to a co-op or to individual buyers, align your marketing strategy with your growth plans and potential changes in buyer relationships.
The outlook on governmental subsidies and trade agreements also influences your business strategy. The global marketplace has resulted in changes in all industries, so consider if your business would benefit from either overseas expansion of your production or marketing to foreign buyers.Strategic Business Planning for Commercial Producers is a comprehensive curriculum for educators to use in teaching commercial farm managers to be highly effective business managers.
To be successful, farm managers must either have or acquire a comprehensive set of strategy, finance, marketing and risk management tools. Strategic Business Planning. If you are commercial producer, your strategic business planning has three goals: to manage your operation for maximum production, to manage risk by protecting the.
1 Strategic Business Planning for Commercial Producers The Setting Strategic Planning: What Is the Process? Craig Dobbins and Cole Ehmke Center for Food and Agricultural Business Purdue University Strategic planning is a necessary skill for farm business managers to cultivate.
The Home of the 4 Hour Investor Grade Business Plan. Faster investor quality documentation using HyperQuestions. Strategic Business Planning for Commercial Producers What is strategy?
• “Competitive strategy is about being different.” • “Strategy is the creation of a unique and valuable position in your industry.” • “Activities are the basic units of competitive advantage.”.
The latest evidence-based, unbiased research, education and solutions for producers of row crops and commercial horticulture | Arkansas Cooperative Extension Service.