Assistant Professor/Grain Markets Specialist ECON 338C: Topics in Grain Marketing Chad Hart Assistant Professor/Grain Markets Specialist chart@iastate.edu 515-294-9911 1

Today’s Topic Reminder on Marketing Assignment, Marketing Plans, Final Exam, & Course Evaluations

Prices 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)

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

Ego New generation contracts are one way to remove emotion from marketing Greed Fear

Changes in Price Volatility Source: Zulauf and Roberts, Ohio State

Historical Soybean Volatility Changes Source: Zulauf and Roberts, Ohio State

Overall Shift Source: Zulauf and Roberts, Ohio State

Source: Zulauf and Roberts, Ohio State

Source: Zulauf and Roberts, Ohio State

Source: Zulauf and Roberts, Ohio State

Source: Zulauf and Roberts, Ohio State

Factors Leading to Higher Commodity Prices Source: USDA-ERS, Trostle, July 2008

Ammonia Prices 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.

Marketing Objectives Get the highest selling price Reduce price risk 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

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

Bushels to Sell Breakeven Costs 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?

Tools and Opportunities 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

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

Another Template Source: O’Brien, Grain Marketing Plans for Farmers, Kansas State University, July 2000

Another Template Source: O’Brien, Grain Marketing Plans for Farmers, Kansas State University, July 2000

Another Template 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

Decision Trees Source: Usset, U. of Minnesota

Decision Trees 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)

Class web site: http://www. econ. iastate Class web site: http://www.econ.iastate.edu/classes/econ338C/Hart/ Have a great summer!