Let’s Talk about Agricultural Marketing Ag Credit School Ames, Iowa June 4, 2015 Chad Hart Associate Professor/Crop Markets Specialist chart@iastate.edu 515-294-9911 1 1

Marketing A series of events and services to create, modify, and transport a product from initial creation to consumption Possible steps: Market participants: Planning Storage Production Processing Inspection Sale Transport Producers Banks Elevators Insurance companies Processors Transport companies Traders Feeders

Marketing Tools There are 4 basic tools that cover most crop marketing moves, and usually the move is a combination of these tools. Cash Sales Futures Forward Contracts Options

Marketing Targets Successful marketing can be defined in many ways, but some targets are more meaningful than others. Highest Price Long-term Profitability Covering Expenses

Ag Decision Maker www.extension.iastate.edu/agdm/

Fact Sheets, Spreadsheets, & More

Iowa Commodity Challenge www.extension.iastate.edu/agdm/info/icc.html

Iowa Farm Outlook www2.econ.iastate.edu/ifo/

Grain Marketing E-Course www.extension.iastate.edu/ames/agm.htm

ISU Farm Management Specialists www.extension.iastate.edu/ag/farm-management-0

Market Fundamentals Data examining the balance between crop supplies and crop demands When demand is relatively stronger, price rise When supply is relatively stronger, price fall

Crop Supplies

Crop Demands

USDA Data Reports World Ag Supply and Demand Estimates Crop Production Crop Progress Prospective Plantings Acreage Grain Stocks

Seasonal Patterns A price pattern that repeats itself with some degree of accuracy year after year. Often sound reasons for the patterns Supply and demand timing Linked to storage cost or basis patterns

Crop Price Seasonal Patterns Source: USDA, NASS, Monthly Price Data 1980-2013

Iowa Corn Prices vs. Costs

Iowa Soybean Prices vs. Costs

Dec. Corn Futures Nov Dec Jan Feb Mar Apr May June July Aug Sept Oct 2000 2.34 2.28 2.49 2.52 2.53 2.64 2.40 1.94 1.87 1.96 2.08 2001 2.54 2.45 2.47 2.16 2.37 2.24 2.09 2002 2.46 2.39 2.31 2.30 2.19 2.22 2.26 2.33 2.62 2.76 2003 2.41 2.38 2.50 2.42 2.11 2.14 2004 2.48 2.81 2.95 3.11 2.85 2.80 2.07 2005 2.29 2.04 2006 2.43 2.57 2.63 2.71 2.82 2.68 2.77 3.15 2007 3.45 3.50 3.95 3.99 4.08 3.75 3.92 3.69 3.51 3.49 2008 4.32 4.51 5.13 5.30 5.75 6.04 6.50 7.65 6.29 5.18 5.63 4.03 2009 4.43 4.20 4.54 4.06 4.18 4.07 4.40 4.48 3.32 3.28 3.20 3.72 2010 4.37 4.38 3.97 3.94 3.80 3.71 4.27 4.78 2011 5.09 5.29 5.71 6.18 5.78 6.53 6.27 7.13 6.37 7.15 7.37 6.40 2012 5.74 5.52 5.55 5.60 5.37 5.05 5.44 7.40 8.09 7.82 7.51 2013 6.30 6.28 5.77 5.47 5.50 5.33 4.53 4.59 4.33 2014 4.69 4.58 4.60 4.87 4.99 3.79 3.64 3.39 3.34 Source: CBOT, Futures Price for 2nd Friday of the month

Marketing Types Harvest Averaging Price Target Time and Price Extended Time and Price

Marketing Types Harvest Takes the harvest price for 100% of their grain

Average Price Captured Harvest 2000 1.66 2001 1.69 2002 2.29 2003 1.88 2004 1.73 2005 1.48 2006 2.69 2007 3.02 2008 3.69 2009 3.47 2010 5.04 2011 6.10 2012 7.42 2013 4.30 2014 2.96 Average 3.29 Min Max

Marketing Types Averaging Sells 10% of their grain via futures each month January-July Sells the remaining 30% at harvest Sets basis at harvest

Dec. Corn Futures Nov Dec Jan Feb Mar Apr May June July Aug Sept Oct 2000 2.34 2.28 2.49 2.52 2.53 2.64 2.40 1.94 1.87 1.96 2.08 2001 2.54 2.45 2.47 2.16 2.37 2.24 2.09 2002 2.46 2.39 2.31 2.30 2.19 2.22 2.26 2.33 2.62 2.76 2003 2.41 2.38 2.50 2.42 2.11 2.14 2004 2.48 2.81 2.95 3.11 2.85 2.80 2.07 2005 2.29 2.04 2006 2.43 2.57 2.63 2.71 2.82 2.68 2.77 3.15 2007 3.45 3.50 3.95 3.99 4.08 3.75 3.92 3.69 3.51 3.49 2008 4.32 4.51 5.13 5.30 5.75 6.04 6.50 7.65 6.29 5.18 5.63 4.03 2009 4.43 4.20 4.54 4.06 4.18 4.07 4.40 4.48 3.32 3.28 3.20 3.72 2010 4.37 4.38 3.97 3.94 3.80 3.71 4.27 4.78 2011 5.09 5.29 5.71 6.18 5.78 6.53 6.27 7.13 6.37 7.15 7.37 6.40 2012 5.74 5.52 5.55 5.60 5.37 5.05 5.44 7.40 8.09 7.82 7.51 2013 6.30 6.28 5.77 5.47 5.50 5.33 4.53 4.59 4.33 2014 4.69 4.58 4.60 4.87 4.99 3.79 3.64 3.39 3.34

Average Price Captured Harvest Averaging 2000 1.66 1.91 2001 1.69 1.87 2002 2.29 2.11 2003 1.88 2.05 2004 1.73 2.24 2005 1.48 2006 2.69 2.35 2007 3.02 3.27 2008 3.69 5.13 2009 3.47 3.77 2010 5.04 3.84 2011 6.10 6.02 2012 7.42 6.17 2013 4.30 5.08 2014 2.96 3.85 Average 3.29 3.42 Min Max

Marketing Types Price Target Sells 25% of grain via futures when futures price > production cost Sells 25% when futures > costs + $0.25 Sells 25% when futures > costs + $0.50 Sells remaining 25% at harvest Sets basis at harvest Defaults to harvest sales when price objectives are not reached Will start selling in the November before planting

Costs of Production Cost Cost + 0.25 Cost + 0.50 2000 2.43 2.68 2.93 2001 2.56 2.81 3.06 2002 2.55 2.80 3.05 2003 2.42 2.67 2.92 2004 2.58 2.83 3.08 2005 2.79 3.04 3.29 2006 2.86 3.11 3.36 2007 3.54 2008 3.63 3.88 4.13 2009 4.43 4.68 4.93 2010 3.48 3.73 3.98 2011 3.99 4.24 4.49 2012 4.40 4.65 4.90 2013 4.46 4.71 4.96 2014

Dec. Corn Futures Nov Dec Jan Feb Mar Apr May June July Aug Sept Oct 2000 2.34 2.28 2.49 2.52 2.53 2.64 2.40 1.94 1.87 1.96 2.08 2001 2.54 2.45 2.47 2.16 2.37 2.24 2.09 2002 2.46 2.39 2.31 2.30 2.19 2.22 2.26 2.33 2.62 2.76 2003 2.41 2.38 2.50 2.42 2.11 2.14 2004 2.48 2.81 2.95 3.11 2.85 2.80 2.07 2005 2.29 2.04 2006 2.43 2.57 2.63 2.71 2.82 2.68 2.77 3.15 2007 3.45 3.50 3.95 3.99 4.08 3.75 3.92 3.69 3.51 3.49 2008 4.32 4.51 5.13 5.30 5.75 6.04 6.50 7.65 6.29 5.18 5.63 4.03 2009 4.43 4.20 4.54 4.06 4.18 4.07 4.40 4.48 3.32 3.28 3.20 3.72 2010 4.37 4.38 3.97 3.94 3.80 3.71 4.27 4.78 2011 5.09 5.29 5.71 6.18 5.78 6.53 6.27 7.13 6.37 7.15 7.37 6.40 2012 5.74 5.52 5.55 5.60 5.37 5.05 5.44 7.40 8.09 7.82 7.51 2013 6.30 6.28 5.77 5.47 5.50 5.33 4.53 4.59 4.33 2014 4.69 4.58 4.60 4.87 4.99 3.79 3.64 3.39 3.34

Average Price Captured Harvest Averaging Price Target 2000 1.66 1.91 1.76 2001 1.69 1.87 2002 2.29 2.11 2.31 2003 1.88 2.05 1.96 2004 1.73 2.24 2.40 2005 1.48 2006 2.69 2.35 2007 3.02 3.27 3.11 2008 3.69 5.13 4.16 2009 3.47 3.77 3.68 2010 5.04 3.84 3.87 2011 6.10 6.02 5.25 2012 7.42 6.17 5.97 2013 4.30 5.08 5.63 2014 2.96 3.85 4.00 Average 3.29 3.42 3.33 Min Max

Marketing Types Time and Price Sell 25% in March Sell 25% in April Sell 25% in May Sell 25% at harvest Sets basis at harvest Only make March-May sales if futures prices > production costs Defaults to harvest sales if price objectives are not reached

Dec. Corn Futures Nov Dec Jan Feb Mar Apr May June July Aug Sept Oct 2000 2.34 2.28 2.49 2.52 2.53 2.64 2.40 1.94 1.87 1.96 2.08 2001 2.54 2.45 2.47 2.16 2.37 2.24 2.09 2002 2.46 2.39 2.31 2.30 2.19 2.22 2.26 2.33 2.62 2.76 2003 2.41 2.38 2.50 2.42 2.11 2.14 2004 2.48 2.81 2.95 3.11 2.85 2.80 2.07 2005 2.29 2.04 2006 2.43 2.57 2.63 2.71 2.82 2.68 2.77 3.15 2007 3.45 3.50 3.95 3.99 4.08 3.75 3.92 3.69 3.51 3.49 2008 4.32 4.51 5.13 5.30 5.75 6.04 6.50 7.65 6.29 5.18 5.63 4.03 2009 4.43 4.20 4.54 4.06 4.18 4.07 4.40 4.48 3.32 3.28 3.20 3.72 2010 4.37 4.38 3.97 3.94 3.80 3.71 4.27 4.78 2011 5.09 5.29 5.71 6.18 5.78 6.53 6.27 7.13 6.37 7.15 7.37 6.40 2012 5.74 5.52 5.55 5.60 5.37 5.05 5.44 7.40 8.09 7.82 7.51 2013 6.30 6.28 5.77 5.47 5.50 5.33 4.53 4.59 4.33 2014 4.69 4.58 4.60 4.87 4.99 3.79 3.64 3.39 3.34

Average Price Captured Harvest Averaging Price Target Time and Price 2000 1.66 1.91 1.76 2.02 2001 1.69 1.87 2002 2.29 2.11 2.31 2003 1.88 2.05 1.96 2004 1.73 2.24 2.40 2.41 2005 1.48 2006 2.69 2.35 2007 3.02 3.27 3.11 3.28 2008 3.69 5.13 4.16 5.24 2009 3.47 3.77 3.68 2010 5.04 3.84 3.87 3.74 2011 6.10 6.02 5.25 5.94 2012 7.42 6.17 5.97 5.80 2013 4.30 5.08 5.63 5.12 2014 2.96 3.85 4.00 4.17 Average 3.29 3.42 3.33 3.41 Min Max

Marketing Types Extended Time and Price Sell 25% in March or when futures prices > production costs Sell 25% in April or when futures prices > costs + $0.25 Sell 25% in May or when futures prices > costs + $0.50 Only make March-May sales if futures prices > costs Sell remaining crop at harvest Sets basis at harvest Defaults to harvest sales if price objectives are not reached

Dec. Corn Futures Nov Dec Jan Feb Mar Apr May June July Aug Sept Oct 2000 2.34 2.28 2.49 2.52 2.53 2.64 2.40 1.94 1.87 1.96 2.08 2001 2.54 2.45 2.47 2.16 2.37 2.24 2.09 2002 2.46 2.39 2.31 2.30 2.19 2.22 2.26 2.33 2.62 2.76 2003 2.41 2.38 2.50 2.42 2.11 2.14 2004 2.48 2.81 2.95 3.11 2.85 2.80 2.07 2005 2.29 2.04 2006 2.43 2.57 2.63 2.71 2.82 2.68 2.77 3.15 2007 3.45 3.50 3.95 3.99 4.08 3.75 3.92 3.69 3.51 3.49 2008 4.32 4.51 5.13 5.30 5.75 6.04 6.50 7.65 6.29 5.18 5.63 4.03 2009 4.43 4.20 4.54 4.06 4.18 4.07 4.40 4.48 3.32 3.28 3.20 3.72 2010 4.37 4.38 3.97 3.94 3.80 3.71 4.27 4.78 2011 5.09 5.29 5.71 6.18 5.78 6.53 6.27 7.13 6.37 7.15 7.37 6.40 2012 5.74 5.52 5.55 5.60 5.37 5.05 5.44 7.40 8.09 7.82 7.51 2013 6.30 6.28 5.77 5.47 5.50 5.33 4.53 4.59 4.33 2014 4.69 4.58 4.60 4.87 4.99 3.79 3.64 3.39 3.34

Average Price Captured Harvest Averaging Price Target Time and Price Extended Time and Price 2000 1.66 1.91 1.76 2.02 2001 1.69 1.87 2002 2.29 2.11 2.31 2.35 2003 1.88 2.05 1.96 2004 1.73 2.24 2.40 2.41 2.33 2005 1.48 2006 2.69 2007 3.02 3.27 3.11 3.28 2008 3.69 5.13 4.16 5.24 2009 3.47 3.77 3.68 2010 5.04 3.84 3.87 3.74 2011 6.10 6.02 5.25 5.94 2012 7.42 6.17 5.97 5.80 2013 4.30 5.08 5.63 5.12 2014 2.96 3.85 4.00 4.17 Average 3.29 3.42 3.33 3.41 3.34 Min Max

Extended Time and Price Lowest Average Harvest Averaging Price Target Time and Price Extended Time and Price 2000 1.66 1.91 1.76 2.02 2001 1.69 1.87 2002 2.29 2.11 2.31 2.35 2003 1.88 2.05 1.96 2004 1.73 2.24 2.40 2.41 2.33 2005 1.48 2006 2.69 2007 3.02 3.27 3.11 3.28 2008 3.69 5.13 4.16 5.24 2009 3.47 3.77 3.68 2010 5.04 3.84 3.87 3.74 2011 6.10 6.02 5.25 5.94 2012 7.42 6.17 5.97 5.80 2013 4.30 5.08 5.63 5.12 2014 2.96 3.85 4.00 4.17 Lowest out of 15 years 10 2 3 6 4

Extended Time and Price Highest Average Harvest Averaging Price Target Time and Price Extended Time and Price 2000 1.66 1.91 1.76 2.02 2001 1.69 1.87 2002 2.29 2.11 2.31 2.35 2003 1.88 2.05 1.96 2004 1.73 2.24 2.40 2.41 2.33 2005 1.48 2006 2.69 2007 3.02 3.27 3.11 3.28 2008 3.69 5.13 4.16 5.24 2009 3.47 3.77 3.68 2010 5.04 3.84 3.87 3.74 2011 6.10 6.02 5.25 5.94 2012 7.42 6.17 5.97 5.80 2013 4.30 5.08 5.63 5.12 2014 2.96 3.85 4.00 4.17 Highest out of 15 years 4 2 6

Extended Time and Price Longer History Harvest Averaging Price Target Time and Price Extended Time and Price Average 2.59 2.70 2.65 2.66 Min 1.14 1.41 Max 7.42 6.17 5.97 5.94 Low Price 25 8 4 11 9 High Price 10 16 Out of 39 years (1976-2014)

Iowa Corn Prices vs. Costs

Iowa Soybean Prices vs. Costs

Thank you for your time. Any questions. My web site: http://www. econ Thank you for your time! Any questions? My web site: http://www.econ.iastate.edu/~chart/ Iowa Farm Outlook: http://www.econ.iastate.edu/ifo/ Ag Decision Maker: http://www.extension.iastate.edu/agdm/