1. Agricultural Marketing
ECON 337:
Agricultural Marketing
Lee Schulz
Assistant Professor
Chad Hart
Associate 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. 15
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 $15.00
Apr. 12 $14.10
Basis at Sale: -$0.03
Prod. Costs: -$9.95
Futures Prices: Jan. 15 $
Apr. 12 $14.13
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) * $15.00/bu * 7.5% * 10,000 bu
$5, or $ /bu
Total $5, or $ /bu

6. Futures/Options Return
Sold May ’13 Futures on Jan. $
Offset by buying May ’13 Futures on Apr. $14.13
Paid broker $0.01/bu for the service
Per Bushel Return:
($ $14.13) - $0.01 = -$0.1425
Total Return on Hedge: -$1,425

7. Final Tally Per Bushel Total Cash Price $14.10 $141,000.00
Production Cost
-$ 9.95
-$ 99,500.00
$ 4.15
$ 41,500.00
Costs of Ownership -$
-$ 5,602.50 $
$ 35,897.50
Futures/Options Return -$
-$ 1,425.00
Final Net Return $
$ 34,472.50

8. Historical Comparison

9. Historical Comparison
Average $0.41/bushel

10. Have a great VEISHEA weekend!
Class web site:
Have a great VEISHEA weekend!