1. Agricultural Marketing
ECON 337:
Agricultural Marketing
Chad Hart
Assistant Professor 1

2. Example Transaction for Marketing Report
Details
Cash Price
Basis
Gross Revenue
Net Return after Prod. Costs
Futures/Options Return
Storage and Opportunity Costs
Final Net Return

3. 10,000 Bushels of Soybeans Stored at Home
Timeline
Harvested Nov. 1
Hedged with futures Jan. 10
Offset hedge and sold Apr. 12
So the beans were in storage for 5.4 months

4. Relevant Prices and Costs
Cash Prices: Nov. 1 $11.55
Apr. 12 $13.79
Basis at Sale: -$0.62
Prod. Costs: -$9.45
Futures Prices: Jan. 10 $12.41
Apr. 12 $14.41
Storage Costs: $0.01/month
Interest Rate: 7.5%

5. Costs of Ownership Storage Costs Opportunity Costs
5.4 months * $0.01/bu/month * 10,000 bu
$540 or $0.054/bu
Opportunity Costs
(5.4/12) * $11.55/bu * 7.5% * 10,000 bu
$3,900 or $0.39/bu
Total $4,440 or $0.444/bu

6. Futures/Options Return
Sold May ’12 Futures on Jan. $12.41
Offset by buying May ’12 Futures on Apr. $14.41
Paid broker $0.01/bu for the service
Per Bushel Return:
($ $14.41) - $0.01 = -$2.01
Total Return on Hedge: -$20,100

7. Final Tally Per Bushel Total Cash Price $13.79 $137,900
Production Cost
$ 9.45
$ 94,500
$ 4.34
$ 43,400
Costs of Ownership $
$ 4,440 $
$ 38,960
Futures/Options Return
$ 2.01
$ 20,100
Final Net Return $
$ 18,860

8. Historical Comparison

9. Historical Comparison
Average $0.40/bushel
For 2011, Captured $1.89/bushel

10. Class web site: