1. Copyright © 2005 Center for Farm Financial Management, University of Minnesota. All Rights Reserved. Celebrity Squares Search for a Pre- Harvest Advantage Edward C. Usset, Grain Marketing Specialist Center for Farm Financial Management University of Minnesota email: usset001@umn.edu

2. Copyright © 2005 Center for Farm Financial Management, University of Minnesota. All Rights Reserved. Celebrity Squares Search for a Pre- Harvest Advantage 2006 ICBA National Convention Edward C. Usset, Grain Marketing Specialist Center for Farm Financial Management University of Minnesota email: usset001@umn.edu

3. Copyright © 2005 Center for Farm Financial Management, University of Minnesota. All Rights Reserved. Brought to you today by… Celebrity Squares Search for a Pre-Harvest Advantage

4. Copyright © 2005 Center for Farm Financial Management, University of Minnesota. All Rights Reserved. Brought to you today by… Celebrity Squares Search for a Pre-Harvest Advantage KleinBank Haugen Insurance Agency

5. Copyright © 2005 Center for Farm Financial Management, University of Minnesota. All Rights Reserved. A comprehensive whole farm financial planning and analysis system A tool to help develop, monitor and implement marketing plans for crops and milk Center for Farm Financial Management 1-800-234-1111 www.cffm.umn.edu

6. Copyright © 2005 Center for Farm Financial Management, University of Minnesota. All Rights Reserved. WtG 1: The Pre-Harvest Marketing Advantage WtG 2: Launch Your Pre-Harvest Marketing Plan Pre-harvest marketing is a broad view of the market, trying to take advantage of early seasonal price tendencies. Crop insurance is a critical part of marketing. Winner of the 2004 AAEA Distinguished Extension Group Award!

7. Copyright © 2005 Center for Farm Financial Management, University of Minnesota. All Rights Reserved. Call CFFM at 800-234-1111 for more information about how to sponsor a “Winning the Game” workshop in your town. Post harvest marketing is a practical approach to the current environment, adapting to market signals and incentives. Tactics may change from one year to the next. WtG 3: The Post Harvest Marketing Challenge

8. Copyright © 2005 Center for Farm Financial Management, University of Minnesota. All Rights Reserved. 2006 Owatonna January 18/19, February 1/2 and February 15/16 To register call CFFM at 800-234-1111 or http://www.cffm.umn.edu Questions? usset001@umn.edu or (651) 308-8224 What? 6 days of intensive marketing education and training Who? Producers with a moderate base of marketing knowledge Heavy reliance on outside experts, examples and problem solving Cost: $375 per participant, with enrollment limited to 60

9. Copyright © 2005 Center for Farm Financial Management, University of Minnesota. All Rights Reserved. …your check-off dollars at work Celebrity Squares Search for a Pre-Harvest Advantage

10. Copyright © 2005 Center for Farm Financial Management, University of Minnesota. All Rights Reserved. Sponsored by Coming to Moorhead in January… Learn – Compete – Win Two Days Four Games One Winner

11. Copyright © 2005 Center for Farm Financial Management, University of Minnesota. All Rights Reserved. Agenda Meet our celebrity producers Discuss their pre-harvest marketing styles Can our celebrities find a pre-harvest advantage? Can we improve their plans? 2006 pre-harvest plans

12. Copyright © 2005 Center for Farm Financial Management, University of Minnesota. All Rights Reserved. Agenda Meet our old and new celebrity producers Discuss their pre-harvest marketing styles Can our celebrities find a pre-harvest advantage? Can we improve their plans? 2006 pre-harvest plans

13. Copyright © 2005 Center for Farm Financial Management, University of Minnesota. All Rights Reserved. Last year our celebrities took the post harvest challenge, trying to correctly size up market opportunities for storage. Let’s meet them again…

14. Copyright © 2005 Center for Farm Financial Management, University of Minnesota. All Rights Reserved. Barney Binless had no storage Peter Paperfarmer liked options

15. Copyright © 2005 Center for Farm Financial Management, University of Minnesota. All Rights Reserved. Sally Sellthecarry sold the carry Earl Eitheror was flexible

16. Copyright © 2005 Center for Farm Financial Management, University of Minnesota. All Rights Reserved. May Sellers held to spring Hank Holder held too long

17. Copyright © 2005 Center for Farm Financial Management, University of Minnesota. All Rights Reserved. Sizing Up the Market To store or not to store? You need to ask, and answer, more questions… Is basis high or low? What is the carry in the market? Are market prices high or low? What are my storage costs? What is my appetite for risk?

18. Copyright © 2005 Center for Farm Financial Management, University of Minnesota. All Rights Reserved. Sizing Up The Market Basis was very poor in all crops The carrying charges in the corn market appealed to Sally The carry in soybeans was modest but the low basis was appealing Hank and Peter, of course, are bullish 2005 Post Harvest Plans

19. Copyright © 2005 Center for Farm Financial Management, University of Minnesota. All Rights Reserved. Objective: Seek strategies that offer a price higher than the loan rate. Hold no unpriced wheat beyond July 1, 2006. 10,000 bushels: Barney Binless 15,000 bushels: May Sellers Wheat: 2005 Post-Harvest Marketing Plan (assumes no pre-harvest marketing)

20. Copyright © 2005 Center for Farm Financial Management, University of Minnesota. All Rights Reserved. The Minneapolis September wheat contract has gained over 30 cents on the March since mid-August!!

21. Copyright © 2005 Center for Farm Financial Management, University of Minnesota. All Rights Reserved. Objective: Seek strategies that offer a price higher than the loan rate. Hold no unpriced corn beyond July 1, 2006. 84,000 bushels: Sally Sellthecarry/Earl Eitheror Corn: 2005 Post-Harvest Marketing Plan (assumes no pre-harvest marketing)

22. Copyright © 2005 Center for Farm Financial Management, University of Minnesota. All Rights Reserved. Sep. $2.37 July $2.30 May $2.24 March $2.16 Dec. $2.03 CBOT Corn Futures and Pipestone, MN cash market: October 7, 2005 October price @ 63 under $1.40 Take a 44 cent ldp, place the crop in storage at harvest and “sell the carry” with futures/HTA. $1.95 +$0.44 LDP =$2.39 final price How Does Sally “Sell the Carry”? 35 under by spring?

23. Copyright © 2005 Center for Farm Financial Management, University of Minnesota. All Rights Reserved. How does 90 cents under July corn at harvest become 35 cents under the July by spring? How Does Sally “Sell the Carry”? $1.40 cash $2.30 July 90 cents under $????? July $????? cash 35 cents under

24. Copyright © 2005 Center for Farm Financial Management, University of Minnesota. All Rights Reserved. The basis has narrowed 20 cents since harvest.

25. Copyright © 2005 Center for Farm Financial Management, University of Minnesota. All Rights Reserved. Objective: Seek strategies that offer a price higher than the loan rate. Hold no unpriced beans beyond August 1, 2006. 25,000 bushels: Sally Sellthecarry Soybeans: 2005 Post-Harvest Marketing Plan (assumes no pre-harvest marketing)

26. Copyright © 2005 Center for Farm Financial Management, University of Minnesota. All Rights Reserved. July $5.94 May $5.89 March $5.84 Nov. $5.64 CBOT Soybean Futures and Pipestone cash market: October 7, 2005 October price @ 70 under $4.94 Put the crop under loan, place the crop in storage and “sell the carry” with a futures/HTA/forward contract. $5.59 +$0.00 LDP? =$5.59 final price How Does Sally “Sell the Carry”? 35 under by spring?

27. Copyright © 2005 Center for Farm Financial Management, University of Minnesota. All Rights Reserved. How does $1.00 under July soybeans at harvest become 35 cents under the July by spring? How Does Sally “Sell the Carry”? $5.00 cash $6.00 July 1.00 under $????? July $????? cash 35 cents under

28. Copyright © 2005 Center for Farm Financial Management, University of Minnesota. All Rights Reserved. The basis has narrowed 50 cents in six weeks!

29. Copyright © 2005 Center for Farm Financial Management, University of Minnesota. All Rights Reserved. Cash prices are 50 cents higher since harvest!

30. Copyright © 2005 Center for Farm Financial Management, University of Minnesota. All Rights Reserved. May $3.59 Mar $3.54 Dec $3.43 Sep $3.35 August 16 closes MGEX Alvarado local market $2.99 Take the LDP of 10 cents, place the crop in storage and “sell the carry” with an HTA! I expect 10 under the May between November and April. How Does Sally “Sell the Carry” $3.49 36 under basis 10 under? 0.10 LDP $3.59

31. Copyright © 2005 Center for Farm Financial Management, University of Minnesota. All Rights Reserved. Objective: Seek strategies that offer a price higher than the loan rate. Hold no unpriced beans beyond August 1, 2006. 10,000 bushels: Barney Binless 15,000 bushels: May Sellers/Earl Eitheror Soybeans: 2005 Post-Harvest Marketing Plan (assumes no pre-harvest marketing) Should Sally have a role in soybeans this year?

32. Copyright © 2005 Center for Farm Financial Management, University of Minnesota. All Rights Reserved. Jul $6.07 May $6.02 Mar $5.97 Nov $5.80 Pipestone Soybeans September 14 $5.20 How Does Sally “Sell the Carry” $5.82 60 under basis 25 under? plus an LDP?

33. Copyright © 2005 Center for Farm Financial Management, University of Minnesota. All Rights Reserved. This year our celebrities will search for a pre-harvest advantage.

34. Copyright © 2005 Center for Farm Financial Management, University of Minnesota. All Rights Reserved. Why is Marketing Important? The average farm earns 20-30 cents per bushel (including gov’t payments). Just 10 cents more per bushel could increase net income by 33-50%! Great marketing is not finding the high price. It’s finding an extra 10-20 cents per bushel with a solid plan that avoids mistakes. Can our celebrities find a dime?

35. Copyright © 2005 Center for Farm Financial Management, University of Minnesota. All Rights Reserved. What is the Pre-Harvest Advantage? Early sales could be our best sales. Can we find a dime in pre-harvest marketing?

36. Copyright © 2005 Center for Farm Financial Management, University of Minnesota. All Rights Reserved. Let’s meet our celebrities…

37. Copyright © 2005 Center for Farm Financial Management, University of Minnesota. All Rights Reserved.

38. Barney Binless Barney has no storage and no interest in pre-harvest marketing. He is our benchmark - his price is the harvest price each year.

39. Copyright © 2005 Center for Farm Financial Management, University of Minnesota. All Rights Reserved.

40. Grandma Grandma likes to keep her marketing plan simple. She prices 10% of her new crop corn, soybeans and wheat each month from January thru July – 70% of her total expected crop.

41. Copyright © 2005 Center for Farm Financial Management, University of Minnesota. All Rights Reserved.

42. Justin Price Justin only pays attention to prices. He is willing to price 25% increments at… $2.50, $2.75 & $3.00 Dec. Corn $5.50, $6.25 & $7.00 Nov. Soybeans $3.50, $3.85 & $4.20 Sept. Wheat

43. Copyright © 2005 Center for Farm Financial Management, University of Minnesota. All Rights Reserved. Corn Yield (bu./acre)152.0 Direct & overhead$2.17 With labor & mgmt$2.35 Less gov’t pay & other$2.10 Southern MN Cost of Production FINBIN Average, Cash Rent, 2000-2003 $2.50 December futures, or $2.10 cash price (the harvest basis averages 40 cents under), is consistent with a break-even cost of production. “The break even price to cover all costs and a return to labor & management”

44. Copyright © 2005 Center for Farm Financial Management, University of Minnesota. All Rights Reserved. Pricing Targets Frequency that Chicago December Corn Futures Exceeded Given Price Level, 1980-2005

45. Copyright © 2005 Center for Farm Financial Management, University of Minnesota. All Rights Reserved. Pricing Targets Frequency that Chicago December Corn Futures Exceeded Given Price Level, 1980-2005

46. Copyright © 2005 Center for Farm Financial Management, University of Minnesota. All Rights Reserved. Soybeans Yield (bu./acre)42.9 Direct & overhead$5.47 With labor & mgmt$5.99 Less gov’t pay & other$5.06 Southern MN Cost of Production FINBIN Average, Cash Rent, 2000-2003 $5.50 November futures, or $5.00 cash price (the harvest basis averages 50 cents under), is consistent with a break-even cost of production. “The break even price to cover all costs and a return to labor & management”

47. Copyright © 2005 Center for Farm Financial Management, University of Minnesota. All Rights Reserved. Pricing Targets Frequency that Chicago November Soybean Futures Exceeded Given Price Level, 1980-2005

48. Copyright © 2005 Center for Farm Financial Management, University of Minnesota. All Rights Reserved. Pricing Targets Frequency that Chicago November Soybean Futures Exceeded Given Price Level, 1980-2005

49. Copyright © 2005 Center for Farm Financial Management, University of Minnesota. All Rights Reserved. Red River Valley Yield (bu./acre)43.7 Direct & overhead$3.81 With labor & mgmt4.12 Less gov’t pay & other3.08 Spring Wheat Cost of Production FINBIN Average, Cash Rent, 1999-2001 $3.50 September futures, or $3.25 cash price (the harvest basis averages 25 cents under), is consistent with a break-even cost of production. “The break even price to cover all costs and a return to labor & management”

50. Copyright © 2005 Center for Farm Financial Management, University of Minnesota. All Rights Reserved. Pricing Targets Frequency that Minneapolis September Wheat Futures Exceeded Given Price Level, 1980-2005

51. Copyright © 2005 Center for Farm Financial Management, University of Minnesota. All Rights Reserved. Pricing Targets Frequency that Minneapolis September Wheat Futures Exceeded Given Price Level, 1980-2005

52. Copyright © 2005 Center for Farm Financial Management, University of Minnesota. All Rights Reserved. A.Holding B.Uncatchable forward pass C.I've had it up to here with the Vikings Illustrations by Mark Boswell Star Tribune Newspaper Quiz Time!

53. Copyright © 2005 Center for Farm Financial Management, University of Minnesota. All Rights Reserved. A.Holding B.Uncatchable forward pass C.I've had it up to here with the Vikings Illustrations by Mark Boswell Star Tribune Newspaper Quiz Time!

54. Copyright © 2005 Center for Farm Financial Management, University of Minnesota. All Rights Reserved. A.Holding B.Uncatchable forward pass C.I've had it up to here with the Vikings Illustrations by Mark Boswell Star Tribune Newspaper Quiz Time!

55. Copyright © 2005 Center for Farm Financial Management, University of Minnesota. All Rights Reserved. A.Holding B.Uncatchable forward pass C.I've had it up to here with the Vikings Illustrations by Mark Boswell Star Tribune Newspaper Quiz Time!

56. Copyright © 2005 Center for Farm Financial Management, University of Minnesota. All Rights Reserved.

57. Terry Timer Terry pays attention to the seasonal highs in new crop futures prices by pricing 25% increments in March, April and May. But she won’t sell if Dec. corn <$2.50, Nov. soybeans <$5.50, or Sept. wheat <$3.50.

58. Copyright © 2005 Center for Farm Financial Management, University of Minnesota. All Rights Reserved. Contract1-May1-OctChange 19802.953.490.54 19813.772.87(0.90) 19822.932.20(0.73) 19833.033.530.50 19843.042.78(0.26) 19852.642.26(0.39) 19862.041.77(0.27) 19871.871.84(0.03) 19882.272.950.68 19892.642.39(0.26) 19902.702.29(0.42) 19912.532.540.01 19922.532.12(0.41) 19932.43 0.00 19942.582.14(0.44) 19952.633.110.48 19963.332.90(0.44) 19972.762.56(0.20) 19982.622.05(0.58) 19992.312.05(0.26) 20002.621.99(0.63) 20012.272.11(0.16) 20022.202.560.36 20032.332.20(0.13) 20043.172.06(1.11) 20052.272.06(0.21) Average2.632.43(0.20) CBOT December Corn Futures, 1980-2005 19 years (73%) the market declined 7 years (27%) the market improved 14 years the market declined more than 25 cents!

59. Copyright © 2005 Center for Farm Financial Management, University of Minnesota. All Rights Reserved. Pre-Harvest Seasonal Price Trends

60. Copyright © 2005 Center for Farm Financial Management, University of Minnesota. All Rights Reserved. Quiz Time! A.$2.75 per bushel B.$2.50 C.$2.25 D.$2.00 In June of last year, Dec’05 corn futures traded as high as $2.58 per bushel. At that time, what was the price projection for December futures at harvest published by Dr. Robert Wisner of Iowa State University? (http://www.econ.iastate.edu/faculty/wisner)

61. Copyright © 2005 Center for Farm Financial Management, University of Minnesota. All Rights Reserved. Quiz Time! A.$2.75 per bushel B.$2.50 C.$2.25 D.$2.00 In June of last year, Dec’05 corn futures traded as high as $2.58 per bushel. At that time, what was the price projection for December futures at harvest published by Dr. Robert Wisner of Iowa State University? (http://www.econ.iastate.edu/faculty/wisner) ⇒

62. Copyright © 2005 Center for Farm Financial Management, University of Minnesota. All Rights Reserved. Contract1-May1-OctChange 19806.458.121.67 19818.276.46(1.81) 19826.785.29(1.50) 19836.788.581.80 19847.135.90(1.24) 19856.065.14(0.93) 19865.244.88(0.36) 19875.345.450.11 19887.148.171.04 19897.245.77(1.47) 19906.556.05(0.51) 19916.095.89(0.20) 19926.055.33(0.72) 19935.966.180.22 19946.285.38(0.90) 19956.066.370.32 19967.587.49(0.08) 19976.966.21(0.76) 19986.175.15(1.02) 19995.144.81(0.33) 20005.804.90(0.90) 20014.344.520.18 20024.565.420.86 20035.536.871.34 20047.455.35(2.10) 20056.225.73(0.49) Average6.275.98(0.30) CBOT November Soybean Futures, 1980-2005 17 years (65%) the market declined 9 years (35%) the market improved 12 years the market declined more than 50 cents!

63. Copyright © 2005 Center for Farm Financial Management, University of Minnesota. All Rights Reserved. Pre-Harvest Seasonal Price Trends

64. Copyright © 2005 Center for Farm Financial Management, University of Minnesota. All Rights Reserved. Quiz Time! A.$6.55 per bushel B.$6.10 C.$5.80 D.$5.55 Last night Nov’06 soybean futures closed at $6.14 per bushel. What is the price projection for November futures at harvest published by Dr. Robert Wisner of Iowa State University? (http://www.econ.iastate.edu/faculty/wisner)

65. Copyright © 2005 Center for Farm Financial Management, University of Minnesota. All Rights Reserved. Quiz Time! A.$6.55 per bushel B.$6.10 C.$5.80 D.$5.55 Last night Nov’06 soybean futures closed at $6.14 per bushel. What is the price projection for November futures at harvest published by Dr. Robert Wisner of Iowa State University? (http://www.econ.iastate.edu/faculty/wisner) ⇒

66. Copyright © 2005 Center for Farm Financial Management, University of Minnesota. All Rights Reserved. Contract1-May1-AugChange 19804.134.680.55 19814.654.21(0.44) 19824.053.88(0.17) 19834.004.080.09 19843.903.960.06 19853.633.19(0.44) 19862.922.68(0.25) 19872.872.60(0.27) 19883.134.120.99 19894.193.93(0.26) 19903.612.81(0.80) 19912.952.88(0.07) 19923.553.06(0.49) 19932.993.150.15 19943.34 (0.00) 19953.654.731.08 19965.934.70(1.23) 19974.393.92(0.48) 19983.613.08(0.53) 19993.333.440.11 20003.352.97(0.38) 20013.473.16(0.31) 20023.01 3.80 0.80 20033.39 3.70 0.32 20044.243.53(0.71) 20053.463.500.04 Average3.683.58(0.10) MGEX September Spring Wheat, 1980-2005 16 years (62%) the market declined 10 years (38%) the market improved 13 years the market declined more than 25 cents!

67. Copyright © 2005 Center for Farm Financial Management, University of Minnesota. All Rights Reserved. Pre-Harvest Seasonal Price Trends

68. Copyright © 2005 Center for Farm Financial Management, University of Minnesota. All Rights Reserved.

69. Peter Paperfarmer Peter likes Terry’s approach to pricing but he “re-owns” each sale with the purchase of a call. He gets Terry’s price, plus any profit or loss from buying an at-the-money December corn call option and holding to September 15 (November soybean calls, Sept wheat calls).

70. Copyright © 2005 Center for Farm Financial Management, University of Minnesota. All Rights Reserved. DateCashFutures/OptionsAction AprilElevator bidding 40 under for new crop corn Dec futures @ $2.75 280 calls cost 17 cents Forward contract for $2.35 and buy December 280 calls for 17 cents Worst case scenario? (i.e. minimum price) $2.35 cash price - 0.17 option cost – 0.01 fee = $2.17 minimum price = grain selling price – premium paid for calls - fees Best case scenario? Poised for profits should December futures go higher than $2.97 ($2.80 + 0.17 + 0.01) No limit to your upside potential! Peter Paperfarmer Meet Our Celebrities…

71. Copyright © 2005 Center for Farm Financial Management, University of Minnesota. All Rights Reserved. Quiz Time! What makes an Iowa farm wife happy?

72. Copyright © 2005 Center for Farm Financial Management, University of Minnesota. All Rights Reserved.

73. Quiz Time! Hey, that ain’t corn!

74. Copyright © 2005 Center for Farm Financial Management, University of Minnesota. All Rights Reserved.

75. About the search: The search for a pre-harvest advantage took place in SW Minnesota (43 under average corn basis, 51 under for soybeans) using actual prices for a 25-year period, 1980-2004. All pre-harvest sales used December or November futures less the actual harvest basis. LDP’s were not considered. Celebrity Squares Search for a Pre- Harvest Advantage – Corn/Soybeans

76. Copyright © 2005 Center for Farm Financial Management, University of Minnesota. All Rights Reserved. Barney Binless gets the Tuesday price between October 12-18. Grandma sells December or November futures each Tuesday between the 4 th and 10 th of the month, January-July, less the actual harvest basis. Justin Price sells when December new crop futures reaches $2.50, $2.75, and $3.00 per bushel (or $5.50, $6.25, and $7.00 November soybeans), anytime starting November 1 of a year earlier. Celebrity Squares Search for a Pre- Harvest Advantage – Corn/Soybeans

77. Copyright © 2005 Center for Farm Financial Management, University of Minnesota. All Rights Reserved. Terry Timer sells December or November futures each Tuesday between the 4 th and 10 th of March, April and May, less the actual harvest basis. She will not sell December corn futures less than $2.50 or November soybean futures less than $5.50, or after June 1. Peter Paperfarmer shadows Terry but “re-owns” each sale with an at-the-money December corn call or November soybean call, sold on September 15. Option premiums before 1990 were estimated. Celebrity Squares Search for a Pre- Harvest Advantage – Corn/Soybeans

78. Copyright © 2005 Center for Farm Financial Management, University of Minnesota. All Rights Reserved. Celebrity Results Corn, 1980-2004 crop yearBarneyGrandmaJustinTerryPeter 1980$2.74$2.34$2.29 $2.44 1981$2.25$2.75$2.66$2.83$2.62 1982$1.83$2.28$2.71$2.34$2.17 1983$2.93$2.50$2.40$2.56$2.74 1984$2.54$2.64$2.62$2.66$2.53 1985$2.10$2.38$2.42$2.43$2.31 1986$1.20$1.47$1.20 1987$1.35$1.26$1.35 1988$2.45$2.12$2.38$2.45 1989$1.97$2.14$2.12$2.16$2.04 1990$1.88$2.11$2.07$2.14$2.04 1991$2.02$2.05$2.03$2.12$2.04 1992$1.79$2.15$1.90$2.17$2.04 1993$2.13$2.12$2.17$2.13 1994$1.76$2.04$2.00$2.09$1.98 1995$2.71$2.30$2.35$2.25$2.39 1996$2.59$2.87$2.59$2.91$2.74 1997$2.38$2.23$2.33$2.35$2.22 1998$1.76$2.05$2.09$2.11$1.95 1999$1.42$1.65$1.55$1.42 2000$1.63$1.87$1.74$1.98$1.82 2001$1.60$1.81$1.72$1.71$1.65 2002$2.33$2.17$2.39$2.33 2003$1.90$2.04$1.98 $1.94 2004$1.73$2.35$2.29$2.58$2.35 1980-2004 avg.$2.04$2.15$2.13$2.18 $2.12 Worst price?16344 4 Better than BarneyNA17181514 Remember – 25% of Justin, Terry and Peter’s price is the harvest price, as is 30% of Grandma’s price.

79. Copyright © 2005 Center for Farm Financial Management, University of Minnesota. All Rights Reserved. Barney Average Worst Price * Better than Barney * * Out of 25 years Let’s compare to Barney Binless! Celebrity Results Corn, 1980-2004

80. Copyright © 2005 Center for Farm Financial Management, University of Minnesota. All Rights Reserved. Barney Average 2.04 Worst Price * 16 Better than Barney * NA * Out of 25 years Let’s compare to Barney Binless! Celebrity Results Corn, 1980-2004

81. Copyright © 2005 Center for Farm Financial Management, University of Minnesota. All Rights Reserved. Celebrity Results Corn, 1980-2004 BarneyGrandma Average 2.04 Worst Price * 16 Better than Barney * NA * Out of 25 years Barney vs. Grandma

82. Copyright © 2005 Center for Farm Financial Management, University of Minnesota. All Rights Reserved. Celebrity Results Corn, 1980-2004 BarneyGrandma Average 2.042.15 Worst Price * 163 Better than Barney * NA17 * Out of 25 years Barney vs. Grandma

83. Copyright © 2005 Center for Farm Financial Management, University of Minnesota. All Rights Reserved. Celebrity Results Corn, 1980-2004 BarneyGrandma Average 2.042.15 Worst Price * 163 Better than Barney * NA17 * Out of 25 years Grandma found the dime! High odds of a better year Slow but steady adds value! Barney vs. Grandma

84. Copyright © 2005 Center for Farm Financial Management, University of Minnesota. All Rights Reserved. BarneyGrandmaJustin Average 2.042.15 Worst Price * 163 Better than Barney * NA17 * Out of 25 years Celebrity Results Corn, 1980-2004 Barney vs. Justin

85. Copyright © 2005 Center for Farm Financial Management, University of Minnesota. All Rights Reserved. BarneyGrandmaJustin Average 2.042.152.13 Worst Price * 1634 Better than Barney * NA1718 * Out of 25 years Celebrity Results Corn, 1980-2004 Barney vs. Justin

86. Copyright © 2005 Center for Farm Financial Management, University of Minnesota. All Rights Reserved. BarneyGrandmaJustin Average 2.042.152.13 Worst Price * 1634 Better than Barney * NA1718 * Out of 25 years Celebrity Results Corn, 1980-2004 Barney vs. Justin Justin found the dime! High odds of a better year Price targets work!

87. Copyright © 2005 Center for Farm Financial Management, University of Minnesota. All Rights Reserved. BarneyGrandmaJustinTerry Average 2.042.152.13 Worst Price * 1634 Better than Barney * NA1718 * Out of 25 years Celebrity Results Corn, 1980-2004 Barney vs. Terry

88. Copyright © 2005 Center for Farm Financial Management, University of Minnesota. All Rights Reserved. BarneyGrandmaJustinTerry Average 2.042.152.132.18 Worst Price * 16344 Better than Barney * NA171815 * Out of 25 years Celebrity Results Corn, 1980-2004 Barney vs. Terry

89. Copyright © 2005 Center for Farm Financial Management, University of Minnesota. All Rights Reserved. BarneyGrandmaJustinTerry Average 2.042.152.132.18 Worst Price * 16344 Better than Barney * NA171815 * Out of 25 years Celebrity Results Corn, 1980-2004 Barney vs. Terry Terry found 14 cents! Good odds of a better year Timed selling works too!

90. Copyright © 2005 Center for Farm Financial Management, University of Minnesota. All Rights Reserved. BarneyGrandmaJustinTerryPeter Average 2.042.152.132.18 Worst Price * 16344 Better than Barney * NA171815 * Out of 25 years Celebrity Results Corn, 1980-2004 Barney vs. Peter

91. Copyright © 2005 Center for Farm Financial Management, University of Minnesota. All Rights Reserved. BarneyGrandmaJustinTerryPeter Average 2.042.152.132.182.12 Worst Price * 163444 Better than Barney * NA17181514 * Out of 25 years Celebrity Results Corn, 1980-2004 Barney vs. Peter

92. Copyright © 2005 Center for Farm Financial Management, University of Minnesota. All Rights Reserved. BarneyGrandmaJustinTerryPeter Average 2.042.152.132.182.12 Worst Price * 163444 Better than Barney * NA17181514 * Out of 25 years Celebrity Results Corn, 1980-2004 Barney vs. Peter Even Peter found 8 cents! Ok odds of a better year Options cost him 6 cents

93. Copyright © 2005 Center for Farm Financial Management, University of Minnesota. All Rights Reserved. BarneyGrandmaJustinTerryPeter Average 2.042.152.132.182.12 Worst Price * 163444 Better than Barney * NA17181514 * Out of 25 years Celebrity Results Corn, 1980-2004

94. Copyright © 2005 Center for Farm Financial Management, University of Minnesota. All Rights Reserved. Celebrity Results Soybeans, 1980-2004 crop yearBarneyGrandmaJustinTerryPeter 1980$7.57$6.42$6.64$6.18$6.95 1981$5.87$6.80$7.06$6.98$6.58 1982$4.98$5.81$6.54$5.92$5.65 1983$8.02$6.38$6.32$6.40$7.56 1984$5.92$6.49$6.33$6.65$6.33 1985$4.72$5.32$5.51$5.42$5.20 1986$4.25$4.54$4.44$4.25 1987$4.74$4.55$4.77$4.85$4.71 1988$7.48$7.02$6.16$6.62$7.69 1989$5.18$6.24$6.47$6.44$6.13 1990$5.64$5.71$5.62$5.78$5.66 1991$5.05$5.38$5.42$5.56$5.43 1992$5.01$5.48$5.35$5.53$5.28 1993$5.73$5.68$5.66$5.59$5.58 1994$4.96$5.53$5.36$5.56$5.35 1995$5.90$5.51$5.69$5.50$5.43 1996$6.60$6.93$6.52$7.10$7.03 1997$6.57$6.35$6.32$6.56$6.25 1998$5.07$5.55$6.15$5.58$5.32 1999$4.39$4.41$4.64$4.39 2000$4.23$4.65$4.44$4.94$4.61 2001$3.87$4.12$3.87 2002$5.09$4.53$5.11$5.09 2003$7.01$5.60$6.18$5.65$5.79 2004$4.73$6.07$5.74$6.63$6.11 1980-2004 average$5.54$5.64$5.69$5.72$5.69 Worst Price?143546 Better than BarneyNA161514 Remember – 25% of Justin, Terry and Peter’s price is the harvest price, as is 30% of Grandma’s price.

95. Copyright © 2005 Center for Farm Financial Management, University of Minnesota. All Rights Reserved. Celebrity Results Soybeans, 1980-2004 Barney Average Worst Price * Better than Barney * * Out of 25 years Let’s compare to Barney Binless!

96. Copyright © 2005 Center for Farm Financial Management, University of Minnesota. All Rights Reserved. Celebrity Results Soybeans, 1980-2004 Barney Average 5.54 Worst Price * 14 Better than Barney * NA * Out of 25 years Let’s compare to Barney Binless!

97. Copyright © 2005 Center for Farm Financial Management, University of Minnesota. All Rights Reserved. Celebrity Results Soybeans, 1980-2004 BarneyGrandma Average 5.54 Worst Price * 14 Better than Barney * NA * Out of 25 years Barney vs. Grandma

98. Copyright © 2005 Center for Farm Financial Management, University of Minnesota. All Rights Reserved. Celebrity Results Soybeans, 1980-2004 BarneyGrandma Average 5.545.64 Worst Price * 143 Better than Barney * NA16 * Out of 25 years Barney vs. Grandma

99. Copyright © 2005 Center for Farm Financial Management, University of Minnesota. All Rights Reserved. Celebrity Results Soybeans, 1980-2004 BarneyGrandma Average 5.545.64 Worst Price * 143 Better than Barney * NA16 * Out of 25 years Barney vs. Grandma Grandma found the dime! High odds of a better year Slow but steady adds value!

100. Copyright © 2005 Center for Farm Financial Management, University of Minnesota. All Rights Reserved. Celebrity Results Soybeans, 1980-2004 BarneyGrandmaJustin Average 5.545.64 Worst Price * 143 Better than Barney * NA16 * Out of 25 years Barney vs. Justin

101. Copyright © 2005 Center for Farm Financial Management, University of Minnesota. All Rights Reserved. Celebrity Results Soybeans, 1980-2004 BarneyGrandmaJustin Average 5.545.645.69 Worst Price * 1435 Better than Barney * NA1615 * Out of 25 years Barney vs. Justin

102. Copyright © 2005 Center for Farm Financial Management, University of Minnesota. All Rights Reserved. Celebrity Results Soybeans, 1980-2004 BarneyGrandmaJustin Average 5.545.645.69 Worst Price * 1435 Better than Barney * NA1615 * Out of 25 years Barney vs. Justin Justin found 15 cents! High odds of a better year Price targets work!

103. Copyright © 2005 Center for Farm Financial Management, University of Minnesota. All Rights Reserved. Celebrity Results Soybeans, 1980-2004 BarneyGrandmaJustinTerry Average 5.545.645.69 Worst Price * 1435 Better than Barney * NA1615 * Out of 25 years Barney vs. Terry

104. Copyright © 2005 Center for Farm Financial Management, University of Minnesota. All Rights Reserved. Celebrity Results Soybeans, 1980-2004 BarneyGrandmaJustinTerry Average 5.545.645.695.72 Worst Price * 14354 Better than Barney * NA161514 * Out of 25 years Barney vs. Terry

105. Copyright © 2005 Center for Farm Financial Management, University of Minnesota. All Rights Reserved. Celebrity Results Soybeans, 1980-2004 BarneyGrandmaJustinTerry Average 5.545.645.695.72 Worst Price * 14354 Better than Barney * NA161514 * Out of 25 years Barney vs. Terry Terry found 18 cents! Good odds of a better year Timed selling works too!

106. Copyright © 2005 Center for Farm Financial Management, University of Minnesota. All Rights Reserved. Celebrity Results Soybeans, 1980-2004 BarneyGrandmaJustinTerryPeter Average 5.545.645.695.72 Worst Price * 14354 Better than Barney * NA161514 * Out of 25 years Barney vs. Peter

107. Copyright © 2005 Center for Farm Financial Management, University of Minnesota. All Rights Reserved. Celebrity Results Soybeans, 1980-2004 BarneyGrandmaJustinTerryPeter Average 5.545.645.695.725.69 Worst Price * 143546 Better than Barney * NA161514 * Out of 25 years Barney vs. Peter

108. Copyright © 2005 Center for Farm Financial Management, University of Minnesota. All Rights Reserved. Celebrity Results Soybeans, 1980-2004 BarneyGrandmaJustinTerryPeter Average 5.545.645.695.725.69 Worst Price * 143546 Better than Barney * NA161514 * Out of 25 years Barney vs. Peter Even Peter found 15 cents! Good odds of a better year Options cost him 3 cents

109. Copyright © 2005 Center for Farm Financial Management, University of Minnesota. All Rights Reserved. Celebrity Results Soybeans, 1980-2004 BarneyGrandmaJustinTerryPeter Average 5.545.645.695.725.69 Worst Price * 143546 Better than Barney * NA161514 * Out of 25 years

110. Copyright © 2005 Center for Farm Financial Management, University of Minnesota. All Rights Reserved. Quiz Time! Which of the following states enjoyed the largest increase in harvested soybean acres (total acres and percentage) between 1995 and 2004? A.North Dakota B.Wisconsin C.Kansas D.South Dakota

111. Copyright © 2005 Center for Farm Financial Management, University of Minnesota. All Rights Reserved. Quiz Time! Which of the following states enjoyed the largest increase in harvested soybean acres (total acres and percentage) between 1995 and 2004? A.North Dakota B.Wisconsin C.Kansas D.South Dakota ⇒

112. Copyright © 2005 Center for Farm Financial Management, University of Minnesota. All Rights Reserved. Quiz Time! Which of the following states enjoyed the largest increase in harvested soybean acres (total acres and percentage) between 1995 and 2004? A.North Dakota B.Wisconsin C.Kansas D.South Dakota ⇒ ND soybean acres are up over 500% in the last decade!

113. Copyright © 2005 Center for Farm Financial Management, University of Minnesota. All Rights Reserved. About the search: The search for a pre-harvest advantage took place in Crookston (23 under average basis) using actual prices for a 16-year period, 1989-2004. All pre-harvest sales used September MGEX futures less the actual harvest basis. LDP’s were not considered. Celebrity Squares Search for a Pre- Harvest Advantage – Spring Wheat

114. Copyright © 2005 Center for Farm Financial Management, University of Minnesota. All Rights Reserved. Barney Binless gets the Friday price between August 20-26. Grandma sells September futures each Tuesday between the 4 th and 10 th of the month, January-July, less the actual harvest basis. Justin Price sells when September new crop futures reaches $3.50, $3.85, and $4.20 per bushel, anytime starting September 1 of a year earlier. Celebrity Squares Search for a Pre- Harvest Advantage – Spring Wheat

115. Copyright © 2005 Center for Farm Financial Management, University of Minnesota. All Rights Reserved. Terry Timer sells September futures each Tuesday between the 4 th and 10 th of March, April and May, less the actual harvest basis. She will not sell September wheat futures less than $3.50, or after June 1. Peter Paperfarmer shadows Terry but “re-owns” each sale with an at-the-money May wheat call and holds to expiration (3 rd week of April). Some option premiums were estimated. Celebrity Squares Search for a Pre- Harvest Advantage – Spring Wheat

116. Copyright © 2005 Center for Farm Financial Management, University of Minnesota. All Rights Reserved. Celebrity Results Spring Wheat, 1989-2004 crop yearBarneyGrandmaJustinTerryPeter 1989$3.64$3.76$3.75$3.82$3.62 1990$2.52$3.05$2.72$3.13$3.00 1991$2.59$2.60$2.59 1992$2.97$3.32$3.23$3.37$3.22 1993$3.51$3.41$3.60$3.51 1994$3.63$3.32$3.59$3.63 1995$4.35$3.72$3.80$3.57$4.02 1996$4.37$4.59$3.92$4.78$4.54 1997$3.84$3.60$3.89$3.72$3.63 1998$2.96$3.34$3.37$3.42$3.27 1999$2.91$3.01$3.08$3.01$2.91 2000$2.63$2.92$2.82$2.90$2.82 2001$2.96$3.13$3.06$3.14$3.06 2002$3.95$3.31$3.77$3.95 2003$3.43$3.22$3.45$3.24$3.25 2004$3.18$3.63$3.52$3.82$3.62 1980-2004$3.34$3.37$3.39$3.48$3.41 Worst Price?95222 Better than BarneyNA101197 Remember – 25% of Justin, Terry and Peter’s price is the harvest price, as is 30% of Grandma’s price.

117. Copyright © 2005 Center for Farm Financial Management, University of Minnesota. All Rights Reserved. Celebrity Results Spring Wheat, 1989-2004 Barney Average Worst Price * Better than Barney * * Out of 16 years Let’s compare to Barney Binless!

118. Copyright © 2005 Center for Farm Financial Management, University of Minnesota. All Rights Reserved. Celebrity Results Spring Wheat, 1989-2004 Barney Average 3.34 Worst Price * 9 Better than Barney * NA * Out of 16 years Let’s compare to Barney Binless!

119. Copyright © 2005 Center for Farm Financial Management, University of Minnesota. All Rights Reserved. Celebrity Results Spring Wheat, 1989-2004 BarneyGrandma Average 3.34 Worst Price * 9 Better than Barney * NA * Out of 16 years Barney vs. Grandma

120. Copyright © 2005 Center for Farm Financial Management, University of Minnesota. All Rights Reserved. Celebrity Results Spring Wheat, 1989-2004 BarneyGrandma Average 3.343.37 Worst Price * 95 Better than Barney * NA10 * Out of 16 years Barney vs. Grandma

121. Copyright © 2005 Center for Farm Financial Management, University of Minnesota. All Rights Reserved. Celebrity Results Spring Wheat, 1989-2004 BarneyGrandma Average 3.343.37 Worst Price * 95 Better than Barney * NA10 * Out of 16 years Barney vs. Grandma Grandma found a few cents Good odds of a better year Slow but steady adds value!

122. Copyright © 2005 Center for Farm Financial Management, University of Minnesota. All Rights Reserved. Celebrity Results Spring Wheat, 1989-2004 BarneyGrandmaJustin Average 3.343.37 Worst Price * 95 Better than Barney * NA10 * Out of 16 years Barney vs. Justin

123. Copyright © 2005 Center for Farm Financial Management, University of Minnesota. All Rights Reserved. Celebrity Results Spring Wheat, 1989-2004 BarneyGrandmaJustin Average 3.343.373.39 Worst Price * 952 Better than Barney * NA1011 * Out of 16 years Barney vs. Justin

124. Copyright © 2005 Center for Farm Financial Management, University of Minnesota. All Rights Reserved. Celebrity Results Spring Wheat, 1989-2004 BarneyGrandmaJustin Average 3.343.373.39 Worst Price * 952 Better than Barney * NA1011 * Out of 16 years Barney vs. Justin Justin found 5 cents! Good odds of a better year Price targets work!

125. Copyright © 2005 Center for Farm Financial Management, University of Minnesota. All Rights Reserved. Celebrity Results Spring Wheat, 1989-2004 BarneyGrandmaJustinTerry Average 3.343.373.39 Worst Price * 952 Better than Barney * NA1011 * Out of 16 years Barney vs. Terry

126. Copyright © 2005 Center for Farm Financial Management, University of Minnesota. All Rights Reserved. Celebrity Results Spring Wheat, 1989-2004 BarneyGrandmaJustinTerry Average 3.343.373.393.48 Worst Price * 9522 Better than Barney * NA10119 * Out of 16 years Barney vs. Terry

127. Copyright © 2005 Center for Farm Financial Management, University of Minnesota. All Rights Reserved. Celebrity Results Spring Wheat, 1989-2004 BarneyGrandmaJustinTerry Average 3.343.373.393.48 Worst Price * 9522 Better than Barney * NA10119 * Out of 16 years Barney vs. Terry Terry found 14 cents! OK odds of a better year Timed selling works too!

128. Copyright © 2005 Center for Farm Financial Management, University of Minnesota. All Rights Reserved. Contract1-May1-AugChange 19804.134.680.55 19814.654.21(0.44) 19824.053.88(0.17) 19834.004.080.09 19843.903.960.06 19853.633.19(0.44) 19862.922.68(0.25) 19872.872.60(0.27) 19883.134.120.99 19894.193.93(0.26) 19903.612.81(0.80) 19912.952.88(0.07) 19923.553.06(0.49) 19932.993.150.15 19943.34 (0.00) 19953.654.731.08 19965.934.70(1.23) 19974.393.92(0.48) 19983.613.08(0.53) 19993.333.440.11 20003.352.97(0.38) 20013.473.16(0.31) 20023.01 3.80 0.80 20033.39 3.70 0.32 20044.243.53(0.71) 20053.463.500.04 Average3.683.58(0.10) MGEX September Spring Wheat, 1980-2005 16 years (62%) the market declined 10 years (38%) the market improved 13 years the market declined more than 25 cents! No sale!

129. Copyright © 2005 Center for Farm Financial Management, University of Minnesota. All Rights Reserved. Contract1-May1-AugChange 19804.134.680.55 19814.654.21(0.44) 19824.053.88(0.17) 19834.004.080.09 19843.903.960.06 19853.633.19(0.44) 19862.922.68(0.25) 19872.872.60(0.27) 19883.134.120.99 19894.193.93(0.26) 19903.612.81(0.80) 19912.952.88(0.07) 19923.553.06(0.49) 19932.993.150.15 19943.34 (0.00) 19953.654.731.08 19965.934.70(1.23) 19974.393.92(0.48) 19983.613.08(0.53) 19993.333.440.11 20003.352.97(0.38) 20013.473.16(0.31) 20023.01 3.80 0.80 20033.39 3.70 0.32 20044.243.53(0.71) 20053.463.500.04 Average3.683.58(0.10) MGEX September Spring Wheat, 1980-2005 16 years (62%) the market declined 10 years (38%) the market improved 13 years the market declined more than 25 cents!

130. Copyright © 2005 Center for Farm Financial Management, University of Minnesota. All Rights Reserved. Celebrity Results Spring Wheat, 1989-2004 BarneyGrandmaJustinTerryPeter Average 3.343.373.393.48 Worst Price * 9522 Better than Barney * NA10119 * Out of 16 years Barney vs. Peter

131. Copyright © 2005 Center for Farm Financial Management, University of Minnesota. All Rights Reserved. Celebrity Results Spring Wheat, 1989-2004 BarneyGrandmaJustinTerryPeter Average 3.343.373.393.483.41 Worst Price * 95222 Better than Barney * NA101197 * Out of 16 years Barney vs. Peter

132. Copyright © 2005 Center for Farm Financial Management, University of Minnesota. All Rights Reserved. Celebrity Results Spring Wheat, 1989-2004 BarneyGrandmaJustinTerryPeter Average 3.343.373.393.483.41 Worst Price * 95222 Better than Barney * NA101197 * Out of 16 years Barney vs. Peter Even Peter found 7 cents! Not so good odds of a better year Options cost him 3 cents

133. Copyright © 2005 Center for Farm Financial Management, University of Minnesota. All Rights Reserved. Celebrity Results Spring Wheat, 1989-2004 BarneyGrandmaJustinTerryPeter Average 3.343.373.393.483.41 Worst Price * 95222 Better than Barney * NA101197 * Out of 16 years

134. Copyright © 2005 Center for Farm Financial Management, University of Minnesota. All Rights Reserved. What can we conclude from our celebrity search for a pre-harvest advantage?

135. Copyright © 2005 Center for Farm Financial Management, University of Minnesota. All Rights Reserved. What can we conclude from our celebrity search for a pre-harvest advantage?

136. Copyright © 2005 Center for Farm Financial Management, University of Minnesota. All Rights Reserved. What can we conclude from our celebrity search for a pre-harvest advantage? Despite the strut, Barney is a patsy.

137. Copyright © 2005 Center for Farm Financial Management, University of Minnesota. All Rights Reserved. What can we conclude from our celebrity search for a pre-harvest advantage? Despite the strut, Barney is a patsy.

138. Copyright © 2005 Center for Farm Financial Management, University of Minnesota. All Rights Reserved. What can we conclude from our celebrity search for a pre-harvest advantage?

139. Copyright © 2005 Center for Farm Financial Management, University of Minnesota. All Rights Reserved. What can we conclude from our celebrity search for a pre-harvest advantage? Everybody with a plan found the dime, and

140. Copyright © 2005 Center for Farm Financial Management, University of Minnesota. All Rights Reserved. What can we conclude from our celebrity search for a pre-harvest advantage? Everybody with a plan found the dime, and everybody with a plan beat the harvest price, so…

141. Copyright © 2005 Center for Farm Financial Management, University of Minnesota. All Rights Reserved. What can we conclude from our celebrity search for a pre-harvest advantage? Everybody with a plan found the dime, and everybody with a plan beat the harvest price, so… Have a plan!

142. Copyright © 2005 Center for Farm Financial Management, University of Minnesota. All Rights Reserved. Can we improve their pre- harvest marketing plans?

143. Copyright © 2005 Center for Farm Financial Management, University of Minnesota. All Rights Reserved. Grandma has a plan. How could we improve it? Simple is nice, but does it make sense to price grain at less than my loan rate? Grandma needs a minimum price objective.

144. Copyright © 2005 Center for Farm Financial Management, University of Minnesota. All Rights Reserved. Getting your price is great, but what about those years when the market offers good, but not great, prices? Justin needs to mix in some decision dates. Justin has a plan. How could we improve it?

145. Copyright © 2005 Center for Farm Financial Management, University of Minnesota. All Rights Reserved. Seasonal price trends are interesting, but does it make sense to forego earlier or later sales at any price? Terry needs to mix in some price objectives too. Terry has a plan. How could we improve it?

146. Copyright © 2005 Center for Farm Financial Management, University of Minnesota. All Rights Reserved. Comparing Peter’s results to Terry shows that, in the long run, options cost money. Peter profited from options in 3 of 19 years in corn, 4 of 21 years in soybeans, and, 2 of 12 years in wheat. But options can be used to get us to 100% sold! Peter has a plan. How could we improve it?

147. Copyright © 2005 Center for Farm Financial Management, University of Minnesota. All Rights Reserved. Objective: Buy crop insurance to protect my production risk, and have 75% of my anticipated corn crop (based on APH yield) priced by late May. Price 10,000 bushels at $2.10 cash price ($2.50 Dec. futures) using forward contract/futures hedge/futures fixed contract. HTA 1-3-06 @ $2.51½ Dec’06 Price 10,000 bushels at $2.22c/2.62f, or by March 29, pricing tool tbd. Price 10,000 bushels at $2.34c/2.74f, or by April 7, pricing tool tbd. Price 15,000 bushels at $2.46c/2.86f, or by April 27, pricing tool tbd. Price 10,000 bushels at $2.58c/2.98f, or by May 13, pricing tool tbd. Price 10,000 bushels at $2.70c/3.10f, or by May 27, pricing tool tbd. Plan starts on November 1, 2005. Earlier sales will be made at a 15 cent premium to price targets noted above. Ignore decision dates and make no sale if prices are lower than $2.10 local cash price/$2.50 December futures. I will “revisit” my minimum price in February, 2006. Exit all options positions by mid-September. Corn 2006 Pre-Harvest Marketing Plan http://www.cffm.umn.edu/Marketing/MarketingPlans.asp

148. Copyright © 2005 Center for Farm Financial Management, University of Minnesota. All Rights Reserved. Objective: Buy crop insurance to protect my production risk, and have 75% of my anticipated corn crop (based on APH yield) priced by late May. Price 2,500 bushels at $5.15 cash price ($5.65 Nov. futures) using some form of fixed price contract: forward contract, HTA, sell futures. HTA 4-15 @ $5.92½ Nov’06 Price 2,500 bushels at $5.35c/5.85f, or by Mar 15, HTA 6-21 @ $6.45 Nov’06 Price 2,500 bushels at $5.55c/6.05f, or by Mar 29, HTA 6-21 @ $6.45 Nov’06 Price 2,500 bushels at $5.75c/6.25f, or by Apr 7, HTA 12-20 @ $6.38¼ Nov’06 Price 2,500 bushels at $5.95c/6.45f, or by Apr 27, HTA 1-3 @ $6.45¼ Nov’06 Price 2,500 bushels at $6.15c/6.65f, or by May 13, pricing tool tbd. Price 2,500 bushels at $6.35c/6.85f, or by May 27, pricing tool tbd. Plan starts on October 1, 2005. Earlier sales will be made at a 15 cent premium to price targets noted above. Ignore decision dates and make no sale if prices are lower than $5.15 local cash price/$5.65 November futures. Exit all options positions by mid-September. Soybeans 2006 Pre-Harvest Marketing Plan 50% of my 2006 crop has been priced at $6.33 November futures.

149. Copyright © 2005 Center for Farm Financial Management, University of Minnesota. All Rights Reserved. Objective: Buy crop insurance to protect my production risk, and have 75% of my anticipated wheat crop (based on APH yield) priced by late May. Price 2,500 bushels at $3.25 cash price/$3.60 Sep wheat futures using forward contract/futures hedge/futures fixed contract. HTA 9-28 @ $3.70 Sep’06 Price 2,500 bushels at $3.40c/$3.75f, or by March 15, HTA 9-30 @ $3.84 Sep’06 Price 2,500 bushels at $3.55c/$3.90f, or by March 29, HTA 1-3-06 @ $3.92 Sep’06 Price 2,500 bushels at $3.70c/$4.05f, or by April 7, consider options or a trend system. Price 2,500 bushels at $3.85c/$4.10f, or by April 27, consider options or a trend system. Price 2,500 bushels at $4.00c/$4.35f, or by May 12, consider options or a trend system. Price my last 2,500 at $4.15c/$4.50f, or by May 27, consider options or a trend system. Plan starts on September 1, 2005. Earlier sales will be made at a 15 cent premium to price targets noted above. I will consider the December futures contract for new crop sales at a 10 cent premium to September. Ignore decision dates and make no sale if prices are lower than $3.25 local cash price/$3.60 Sep. futures. I will “revisit” my minimum price in February, 2006. Spring Wheat 2006 Pre-Harvest Marketing Plan 30% of my 2006 crop has been priced at $3.82 September futures.

150. Copyright © 2005 Center for Farm Financial Management, University of Minnesota. All Rights Reserved. Three reasons to like pre-harvest sales 1.Strong seasonal tendency 2.LDP’s give me upside potential in a down market 3.The sale is made at a price that works for me!

151. Copyright © 2005 Center for Farm Financial Management, University of Minnesota. All Rights Reserved. I have a pre-harvest marketing plan. Do you have a plan?

152. Copyright © 2005 Center for Farm Financial Management, University of Minnesota. All Rights Reserved. Objective: Buy crop insurance to protect my production risk, and have ___% of my insured (APH) corn crop priced by __________. Price ______ bushels at $______ cash price ($_______ Dec. futures) using ___________. Price ______ bushels at $______, or by _______, using __________________________. Price ______ bushels at $______, or by _______, using __________________________. Price ______ bushels at $______, or by _______, using __________________________. Plan starts on __________________. Earlier sales will be made at a _________ cent premium to price targets noted above. Ignore decision dates and make no sale if prices are lower than $_________ local cash price/$_________ December futures. Corn My 2006 Pre-Harvest Marketing Plan

153. Copyright © 2005 Center for Farm Financial Management, University of Minnesota. All Rights Reserved. Objective: Buy crop insurance to protect my production risk, and have ___% of my insured (APH) soybean crop priced by _________. Price ______ bushels at $______ cash price ($_______ Nov. futures) using ___________. Price ______ bushels at $______, or by _______, using __________________________. Price ______ bushels at $______, or by _______, using __________________________. Price ______ bushels at $______, or by _______, using __________________________. Plan starts on __________________. Earlier sales will be made at a _________ cent premium to price targets noted above. Ignore decision dates and make no sale if prices are lower than $_________ local cash price/$_________ November futures. Soybeans My 2006 Pre-Harvest Marketing Plan

154. Copyright © 2005 Center for Farm Financial Management, University of Minnesota. All Rights Reserved. Objective: Buy crop insurance to protect my production risk, and have ___% of my insured (APH) spring wheat crop priced by __________. Price ______ bushels at $______ cash price ($_______ Sep. futures) using ___________. Price ______ bushels at $______, or by _______, using __________________________. Price ______ bushels at $______, or by _______, using __________________________. Price ______ bushels at $______, or by _______, using __________________________. Plan starts on __________________. Earlier sales will be made at a _________ cent premium to price targets noted above. Ignore decision dates and make no sale if prices are lower than $_________ local cash price/$_________ September futures. Spring Wheat My 2006 Pre-Harvest Marketing Plan

155. Copyright © 2005 Center for Farm Financial Management, University of Minnesota. All Rights Reserved.

156. Who is our unknown celebrity?

157. Copyright © 2005 Center for Farm Financial Management, University of Minnesota. All Rights Reserved. Hank Holder! While our other celebrities are searching for an advantage in pre-harvest pricing, Hank is still holding onto last year’s crop. But the seasonal trends that favor pre-harvest sales are working against the value of old crop grain in the bin. In addition, the old crop basis has begun it’s decline from late spring highs to harvest lows.

158. Copyright © 2005 Center for Farm Financial Management, University of Minnesota. All Rights Reserved. The 11th Commandment of grain marketing: “Thou shall not hold unpriced corn or soybeans in the bin beyond July 1”

159. Copyright © 2005 Center for Farm Financial Management, University of Minnesota. All Rights Reserved. Contract July 1-7Oct 12-18Change 1980 $2.38$2.74$0.36 1981 $2.90$2.25($0.65) 1982 $2.30$1.83($0.47) 1983 $2.90$2.93$0.03 1984 $3.13$2.54($0.59) 1985 $2.40$2.10($0.30) 1986 $1.85$1.20($0.65) 1987 $1.47$1.35($0.12) 1988 $2.86$2.45($0.41) 1989 $2.42$1.97($0.45) 1990 $2.55$1.88($0.67) 1991 $2.03$2.02($0.01) 1992 $2.18$1.79($0.39) 1993 $2.08$2.13$0.05 1994 $2.04$1.76($0.28) 1995 $2.51$2.71$0.20 1996 $4.80$2.59($2.21) 1997 $2.06$2.38$0.32 1998 $2.00$1.76($0.24) 1999 $1.50$1.42($0.08) 2000 $1.48$1.63$0.15 2001 $1.59$1.60$0.01 2002 $2.01$2.33$0.32 2003 $2.05$1.90($0.15) 2004 $2.43$1.73($0.70) Average$2.31$2.04($0.28) Worthington, MN Cash Corn, 1980-2004 17 years (68%) the market declined Of the 8 years (32%) where the market improved, only 5 years did the price rise more than 15 cents!

160. Copyright © 2005 Center for Farm Financial Management, University of Minnesota. All Rights Reserved. Contract July 1-7Oct 12-18Change 1980 $2.38$2.74$0.36 1981 $2.90$2.25($0.65) 1982 $2.30$1.83($0.47) 1983 $2.90$2.93$0.03 1984 $3.13$2.54($0.59) 1985 $2.40$2.10($0.30) 1986 $1.85$1.20($0.65) 1987 $1.47$1.35($0.12) 1988 $2.86$2.45($0.41) 1989 $2.42$1.97($0.45) 1990 $2.55$1.88($0.67) 1991 $2.03$2.02($0.01) 1992 $2.18$1.79($0.39) 1993 $2.08$2.13$0.05 1994 $2.04$1.76($0.28) 1995 $2.51$2.71$0.20 1996 $4.80$2.59($2.21) 1997 $2.06$2.38$0.32 1998 $2.00$1.76($0.24) 1999 $1.50$1.42($0.08) 2000 $1.48$1.63$0.15 2001 $1.59$1.60$0.01 2002 $2.01$2.33$0.32 2003 $2.05$1.90($0.15) 2004 $2.43$1.73($0.70) Average$2.31$2.04($0.28) Worthington, MN Cash Corn, 1980-2004 17 years (68%) the market declined Of the 8 years (32%) where the market improved, only 5 years did the price rise more than 15 cents!

161. Copyright © 2005 Center for Farm Financial Management, University of Minnesota. All Rights Reserved. cash price = futures price + basis 1980-2004 average, from the 1 st week of July to the 2 nd week of October…

162. Copyright © 2005 Center for Farm Financial Management, University of Minnesota. All Rights Reserved. cash price = futures price + basis The cash price falls an average of 28 cents. 1980-2004 average, from the 1 st week of July to the 2 nd week of October…

163. Copyright © 2005 Center for Farm Financial Management, University of Minnesota. All Rights Reserved. cash price = futures price + basis - 28 cents Which component is driving the cash price lower? 1980-2004 average, from the 1 st week of July to the 2 nd week of October…

164. Copyright © 2005 Center for Farm Financial Management, University of Minnesota. All Rights Reserved. cash price = futures price + basis - 28 cents December futures declined in 17 of 25 years (68%) – an average decline of 12 cents! 1980-2004 average, from the 1 st week of July to the 2 nd week of October…

165. Copyright © 2005 Center for Farm Financial Management, University of Minnesota. All Rights Reserved. cash price = futures price + basis - 28 cents- 12 cents The basis* declined in 20 of 25 years (80%) – an average decline of 16 cents! * Measured here as the old crop price less December futures 1980-2004 average, from the 1 st week of July to the 2 nd week of October…

166. Copyright © 2005 Center for Farm Financial Management, University of Minnesota. All Rights Reserved. cash price = futures price + basis - 28 cents- 12 cents- 16 cents Two separate and potent price trends are stacking the deck against Hank. Despite some exceptions, his odds for success are small. 1980-2004 average, from the 1 st week of July to the 2 nd week of October…

167. Copyright © 2005 Center for Farm Financial Management, University of Minnesota. All Rights Reserved. cash price = futures price + basis - 47 cents- 9 cents- 38 cents Soybeans are even a greater challenge! 1980-2004 average, from the 1 st week of July to the 2 nd week of October…

168. Copyright © 2005 Center for Farm Financial Management, University of Minnesota. All Rights Reserved. The 11 th Commandment of Grain Marketing… “Thou shall not hold unpriced wheat in the bin more than three years” South Dakota version

169. Copyright © 2005 Center for Farm Financial Management, University of Minnesota. All Rights Reserved. The conclusion for Hank is clear…

170. Copyright © 2005 Center for Farm Financial Management, University of Minnesota. All Rights Reserved. The conclusion for Hank is clear… Hank is riding the wrong bus!

171. Copyright © 2005 Center for Farm Financial Management, University of Minnesota. All Rights Reserved. Send me an email at… usset001@umn.edu and say… “Put me on your list!” Would you like to get email updates about my marketing plans and actions?

172. Copyright © 2005 Center for Farm Financial Management, University of Minnesota. All Rights Reserved.

180. Ed meets “Captain Cornelius” in Iowa

181. Copyright © 2005 Center for Farm Financial Management, University of Minnesota. All Rights Reserved. Are you looking for a Pre-Harvest Advantage? Do you have a plan?

182. Copyright © 2005 Center for Farm Financial Management, University of Minnesota. All Rights Reserved. Final Thoughts There is no one “right” answer in pre- harvest marketing and some degree of risk is unavoidable Being just Grandma, or just Terry, or just Justin may not be the right approach Diversifying your choices will decrease risk Everybody with a plan beat Barney. Do you have a pre-harvest marketing plan?

183. Copyright © 2005 Center for Farm Financial Management, University of Minnesota. All Rights Reserved. Thanks again! Celebrity Squares Search for a Pre-Harvest Advantage

184. Copyright © 2005 Center for Farm Financial Management, University of Minnesota. All Rights Reserved. Brought to you today by… Celebrity Squares Search for a Pre-Harvest Advantage KleinBank Haugen Insurance Agency

185. Copyright © 2005 Center for Farm Financial Management, University of Minnesota. All Rights Reserved. Sponsored by Coming to Moorhead in January… Learn – Compete – Win