Transcript Slide 1 - Iowa State University

ECON 338C:
Topics in Grain Marketing
Chad Hart
Assistant Professor/Grain Markets Specialist
[email protected]
515-294-9911
Econ 338C, Spring 2009
Today’s Topic
Reminder on Marketing Assignment,
Marketing Plans,
Final Exam, & Course Evaluations
Econ 338C, Spring 2009
Prices
Prices
3/11/2009
3/18/2009
3/25/2009
4/1/2009
CBOT Futures
Heart of Iowa Coop, Gilbert
West Central Coop, Boone
Corn
Soybeans
Corn
Soybeans
Corn
Soybeans
Nearby
July
Nearby
July
Cash
July
Cash
July
Cash
July
Cash
July
3.56
3.75
8.75
8.61
3.44
3.47
8.19
7.95
3.41
3.45
8.19
8.03
3.8825
3.985
9.15
9.1175
3.67
3.71
8.72
8.49
3.72
3.77
8.98
8.82
3.8575
3.9625
9.51
9.46
3.60
3.64
8.98
8.83
3.63
3.67
8.98
8.88
3.96
4.0625
9.52
9.515
3.75
3.78
8.99
8.89
3.74
3.77
9.01
8.93
Basis
3/11/2009
3/18/2009
3/25/2009
4/1/2009
Heart of Iowa Coop, Gilbert
West Central Coop, Boone
Corn
Soybeans
Corn
Soybeans
Cash
July
Cash
July
Cash
July
Cash
July
-0.12
-0.28
-0.56
-0.66
-0.15
-0.30
-0.56
-0.58
-0.21
-0.28
-0.43
-0.63
-0.16
-0.22
-0.17
-0.30
-0.26
-0.32
-0.53
-0.63
-0.23
-0.29
-0.53
-0.58
-0.21
-0.28
-0.53
-0.63
-0.22
-0.29
-0.51
-0.59
Price spreadsheet due today (you can either give
me a printout or e-mail me the file)
Marketing write-up due next week (May 7th)
Econ 338C, Spring 2009
Fear, Greed, and Ego
Fear of making a bad decision
-- Watching prices slip away as you wait
Greed of expecting even higher prices
-- Not taking advantage of good price opportunities
Ego of wanting to claim you caught the market high
-- “Lake Wobegon” marketing
Econ 338C, Spring 2009
Econ 338C, Spring 2009
3/3/2009
1/3/2009
11/3/2008
9/3/2008
7/3/2008
5/3/2008
3/3/2008
1/3/2008
11/3/2007
9/3/2007
7/3/2007
5/3/2007
7
3/3/2007
1/3/2007
$ per bushel
8
Ego
New generation contracts are
one way to remove emotion
from marketing
6
5
4
3
Changes in Price Volatility
Source: Zulauf and Roberts, Ohio State
Econ 338C, Spring 2009
Historical Soybean Volatility Changes
Source: Zulauf and Roberts, Ohio State
Econ 338C, Spring 2009
Overall Shift
Source: Zulauf and Roberts, Ohio State
Econ 338C, Spring 2009
Source: Zulauf and Roberts, Ohio State
Econ 338C, Spring 2009
Source: Zulauf and Roberts, Ohio State
Econ 338C, Spring 2009
Source: Zulauf and Roberts, Ohio State
Econ 338C, Spring 2009
Source: Zulauf and Roberts, Ohio State
Econ 338C, Spring 2009
Factors Leading to Higher Commodity Prices
Econ 338C, Spring 2009
Source: USDA-ERS, Trostle, July 2008
Ammonia Prices
Econ 338C, Spring 2009
Source: http://www.fertilizerworks.com/html/market/
TheMarket.pdf
Marketing Plan
To avoid fear, greed, and ego dominating your
marketing, have a plan and stick to it.
A marketing plan outlines your market strategy and
your marketing objectives.
It should examine marketing opportunities before
and after harvest.
Econ 338C, Spring 2009
Marketing Objectives
Get the highest selling price
Pretty tough to do
More realistic objective: Obtain better than average prices
Reduce price risk
Cover cash flow needs
Minimize tax liability
Look at short and long-term goals for your business
Econ 338C, Spring 2009
Building a Marketing Plan
5 basic steps:
Estimate number of bushels to sell
Calculate breakeven price
Project price and yield scenarios
Compare pricing tools and analyze market
opportunities
Develop a pricing plan
Econ 338C, Spring 2009
Bushels to Sell
What’s your expected production?
What do you have in storage?
What about on-farm use?
Breakeven Costs
What are your production costs?
What are your storage costs?
On-farm vs. off-farm?
What are your cash flow needs?
Econ 338C, Spring 2009
Scenarios
Seasonal price trends
Weather outlook
Export picture
Livestock outlook
Tools and Opportunities
Market tools: Futures, options, forward
contracts
Government tools: Crop insurance,
marketing loans, CCP/ACRE
Econ 338C, Spring 2009
Tentative Pricing Plan
Outline realistic pricing targets
Have periodic price targets and quantities to
sell
Have patience and be willing to reevaluate
price goals
Remember it’s hard to lose money when
making a profit
Econ 338C, Spring 2009
Econ 338C, Spring 2009
Econ 338C, Spring 2009
Econ 338C, Spring 2009
Another Template
Econ 338C, Spring 2009
Source: O’Brien, Grain Marketing Plans for Farmers,
Kansas State University, July 2000
Another Template
Econ 338C, Spring 2009
Source: O’Brien, Grain Marketing Plans for Farmers,
Kansas State University, July 2000
Another Template
Econ 338C, Spring 2009
Source: O’Brien, Grain Marketing Plans for Farmers,
Kansas State University, July 2000
Some Examples
University of Nebraska:
“Achieving Success with a Business Plan: Case Study to Prepare a Grain Farm
Business Plan (CC424)
University of Missouri:
http://extension.missouri.edu/explore/agguides/agecon/g00600.htm
Purdue University:
http://www.agecon.purdue.edu/extension/sbpcp/resources/mrktplan.xls
AgRisk website:
http://www.agrisk.umn.edu/library1/a0000037.pdf
Econ 338C, Spring 2009
Decision Trees
Econ 338C, Spring 2009
Source: Usset, U. of Minnesota
Decision Trees
Econ 338C, Spring 2009
Source: Wisner, Iowa State University
Final
Take home, due May 7
If I’m not in the office, slide it under my door
I’ll post the grades on the class website by
May 12 (Tuesday)
Econ 338C, Spring 2009
Class web site:
http://www.econ.iastate.edu/classes/econ338C/Hart/
Have a great summer!
Econ 338C, Spring 2009