Dairy Marketing Plan Notes

Marketing Goals: Define what you want to achieve.
- Examples:
  - Reduce price variability.
  - Achieve a target percentile ranking.
  - Attain a higher or the highest price.
Management Involvement:
- Passive: Routine fixed strategy (e.g., 15% on the 1st of each month).
- Systematic: Condition-based strategy (e.g., if blue ribbon, outlook up, then…).
- Active: Adjust strategies based on the current environment.
- Involvement level impacts both potential risk and reward.

Marketing Triggers:
- Triggers should align with your price needs and market conditions.
- Consider: Historical data, seasonality, current situation, outlook, forecasts, and technical signals.
Price Triggers:
- Based on the balance between your needs and market conditions.

Tool: FarmDoc Probability Tool
URL: https://fd-tools.ncsa.illinois.edu/pricedistribution
Function: Assesses the probability of prices at expiration.
Example Use: Enter a price to evaluate the probability of the price being below that value at expiration.

Factors for Marketing Decision:
- Time until market month.
- How price compares to triggers.
- General outlook for prices.
Example Actions:
- Hedge 80%.
- Set a floor with unlimited upside.
- Do nothing and watch.
Contingency Plans:
- Address scenarios for markets rally/fall.

Rising Futures:
- Leave upside open using strategies like buying PUT options or minimum price contracts.
- Forward contract & buy CALL option
- Lock-in (sell futures/forward contract)
Falling Futures:
- Protect against falling prices using strategies like selling futures or buying PUT options.
- Forward contract & buy CALL option
- Buy PUT option
- Short fence (buy PUT, sell CALL)

Tools/Strategies:
- Forward Sale
- Short Fence
- Call/Put Options
- Hedge
Considerations:
- When to use each tool based on market conditions and outlook.