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How to be a good marketer in today’s environment

Angie Setzer, vice president of Grain for Citizens, has marketed grain for 16 years. She shared her insights with The Chicago Farmers during TCF’s February 8, 2021, webinar meeting and recommended the marketing behaviors that breed success as we head into 2021.

Angie reflected on last year and its turbulence due to the Covid-19 pandemic. She said the year began with hope, turned into fear and ended with contract highs.

Angie added that China was practically non-existent as a grain buyer and it appeared that it was not coming back to the United States as an importer; but, “it returned in a big way,” she said. Angie added that China has a desire to stock up because crops in 2019 weren’t as large as expected and they were smaller in 2020 also.

She went on to say that importers of grain went from “just in time” supplies to “just in case” because they did not want to take a chance. Angie noted, “Covid-19 shined a light on how precarious the supply chain actually is and it showed the importance of logistics.”

Angie related that China’s buying frenzy created a frenzy elsewhere causing people to wonder what did they know that everyone else did not know.

In addition to a big demand, the concerns over lack of supply were exacerbated by Russia, Argentina, and Ukraine discussing export restrictions. She said the Russian export ban and tax will become effective after February 15^th, and in the meantime they have exported 20 percent more than they had a year ago, with continued massive shipments expected.

The Argentinian government stopped the ability of farmers to ship corn out during January. The Argentine president said the IMF had to give the country more flexible terms on their debt or there would be more restrictions. Farmers fought back on this.

Domestic users were asking for restrictions in the Ukraine, but exporters and farmers say they are unnecessary, creating a multi-party agreement.

Finally, many headlines about food shortages stoked fear.

The falling dollar is adding fuel to the export fire and cementing the idea that U.S. exports have the potential to remain large. Inflation also is on people’s minds. Angie noted that modern monetary policy questions if stimulus really leads to inflation.

As we move forward, there are several things that bear watching, she said:

• China’s ability to avoid a second Covid wave
• Reports of a new strain of African swine flu in the barns of the fourth largest hog producer that reduces the breeding potential of the animals and results in the euthanizing of the hogs
• The spread of the bird flu across Asia into Europe resulting in millions of birds being euthanized
• The new administration’s approaches to stimulus and monetary moves

What is ahead for corn? There continues to be reduced gasoline demand and ethanol production; feeders are struggling. While export sales are large, shipments continue to lag pace needed. Angie said that there is excitement over export sales, but until the bushels are shipped, there is fear of cancellations. She noted that corn acreage is expected to be large.

Regarding beans, there is a massive export demand and sales continue to be larger than expected. She said that the demise of South American production has been exaggerated. Angie said that in December the discussion about drought had many expecting the Brazilian crop to fall, but it did not.

It appears now that the long-term cycle of low prices is behind us and volatility will be the word for 2021. Angie said it is too early in the year to forecast what will or will not happen, but it is a good time for farmers to focus on improving their approach to marketing instead.

In order to become a good marketer, Angie recommends that one should not:

• Always look for a scapegoat
• Fly by the seat of your pants
• Allow emotion to drive decisions
• Fall victim to analysis paralysis
• Believe that one is not smart enough to make changes

Her components for success include:

• Have a plan
• Book profits when possible; don’t always chase profitability
• Have an idea of costs
• Look for outside sources to help
• Limit social media because sometimes one hears so many things an inability to make decisions can develop
• Recognize when you are overwhelmed
• Review your plan

Angie noted that knowing one’s cost structure allows for a level of comfort when booking inputs and marketing production. It also provides an ability to make deferred sales at profitable levels providing long-term peace of mind. She said that less emotion is involved when one knows the point of profitability and what needs to be accomplished pricewise to be successful.

Angie stressed the importance of having a solid plan and understanding it. She also recommended building a team of trusted advisors and friends. “It is important to have people you can talk to and bounce ideas off of,” she said. “You can meet in person or have virtual meetings. It also is helpful to build relationships with local buyers and suppliers,” Angie said.

She pointed out that no one will ever nail the high of the market with anything but luck. Angie said the best strategy is to start with a small percentage of the crop at a point of profitability and continue to sell as the market moves higher. She recommended adjusting targets if information or the outlook begins to change and “always come back to having a plan.”

Angie said that being a good marketer does not happen overnight; it requires constant effort and awareness. She said it was good to realize that old habits aren’t necessarily bad habits; also, little changes can have a big effect such as checking soil health or writing out goals.

In response to a question, Angie answered that she was holding off booking for 2022 because it was impossible to book fertilizer, fuel and other input prices at this point.

“The level of uncertainty in the year ahead is unprecedented, remember you are in business to be profitable when the opportunity arises, not to nail the high,” she said.

Written by The Chicago Farmers Editor, Denise Faris

Webinar Provides Update on 1031 Exchanges

Dan Wagner of Inland Real Estate Group, a sponsor of The Chicago Farmers, Nate Kuhn of Chicagoland 1031 Exchange and Lauren Speidel of Exeter 1031 Exchange Services provided a primer on the use of 1031 Like Kind Exchange Delaware Statutory Trust in a webinar prior to the regular February 8, 2021, meeting seminar.

Dan explained that Inland has been heavily involved in 1031s for a number of years. He related that the Tax Reform Act of 1986 permanently changed tax sheltered limited partnerships. As a result, many sponsors walked away from these investments and lost investor capital. Inland salvaged some of the 1031s by moving its investors into 1031 exchanges using Walmart stores. In 1989, Inland became Walmart’s biggest landlord nationally.

Lauren, regional manager of Exeter, said that Exeter was a nationwide qualified intermediary and she serves as an intermediary. Anyone engaged in a 1031 needs to hire a qualified intermediary to help advise, structure the exchange, prepare documentation, and to securely hold the funds, said Lauren.

She noted that 1031s have been in existence for 100 years and are a great way for people to sell property that has been held for investment purposes, defer taxes, and have the full net sale price working for them in another investment. Lauren added that personal property such as stocks, bonds, cars, boats, or livestock no longer qualify for a 1031 Exchange due to the tax reform act of 2017. She said that a like/kind exchange, which is a 1031, addresses the sale of an investment property and the purchase of another investment property that the person intends to hold for a length of time.

Nate, a financial adviser, helps investors identify what their goals are and helps determine which Delaware Statutory Trust (DST) makes sense for them. Dan pointed out that Inland purchases the property such as storage units, senior living facilities, grocery store, or Amazon distribution center but does not sell interests in the DST. It is not involved in structuring the 1031 Exchange, that is the work of people such as Nate and Lauren and their companies.

Lauren reminded people that when doing a 1031 Exchange, the investor must identify the DST by name and address and they must indicate how much money they intend to invest. Nate noted he would walk clients through this process.

Nate discussed the differences between DSTs and TICs (tenants in common):

• DST investors own a percentage of beneficial interests in the DST that owns the real property; TIC owners have individual deeds for real property.
• The DST is the sole borrower (investors do not have to apply for nor are they liable for any loan); each TIC investor is a borrower and responsible for loan liabilities.
• DSTs are responsible for all property decisions; TICs offer voting rights, but require unanimous approval for a sale, lease and financing.
• DSTs allow a higher number of investors (1,999 vs. 35 for a TIC) and typically require lower minimum investment amounts.

“DSTs allow people to spread their assets and diversify,” added Nate. “The vast majority of deals in which we are involved are structured as DSTs.”

He went on to say, “There is risk, assets are illiquid. DSTs are made to preserve wealth, but they don’t provide immediate access to your principal. An investor should be very sure that a DST fits into their financial plan.”

Nate also noted that DSTs can accommodate both debt and no debt.

Lauren and Nate stressed the importance of beginning the process or research early when considering a DST. “Having a conversation early is the key; a lot of structuring can be done in advance,” said Lauren. “Every 1031 Exchange is different. It is important to get educated. It also is important to engage a qualified intermediary prior to selling a property. The closing statement has to show that an intermediary is involved.”

Their contact information is [email protected], (224) 505-2299, and the link to Chicagoland 1031 Exchange https://hubs.ly/H0GxQ110, and [email protected]., (630) 828-5200.

Written by The Chicago Farmers Editor, Denise Faris