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ECON 339X: Agricultural Marketing

ECON 339X: Agricultural Marketing. Chad Hart Assistant Professor/Grain Markets Specialist chart@iastate.edu 515-294-9911. Marketing Plans. Today’s Topic. Fear, Greed, and Ego. Fear of making a bad decision -- Watching prices slip away as you wait Greed of expecting even higher prices

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ECON 339X: Agricultural Marketing

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  1. ECON 339X: Agricultural Marketing Chad Hart Assistant Professor/Grain Markets Specialist chart@iastate.edu 515-294-9911

  2. Marketing Plans Today’s Topic

  3. 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

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

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

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

  7. Overall Shift Source: Zulauf and Roberts, Ohio State

  8. Source: Zulauf and Roberts, Ohio State

  9. Source: Zulauf and Roberts, Ohio State

  10. Source: Zulauf and Roberts, Ohio State

  11. Source: Zulauf and Roberts, Ohio State

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

  13. Ammonia Prices Source: http://www.fertilizerworks.com/html/market/ TheMarket.pdf

  14. 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.

  15. Marketing Objectives • Get the highest selling price • 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

  16. 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

  17. Bushels to Sell • 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?

  18. 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

  19. 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

  20. Seasonal Pricing Patterns Source: USDA, NASS, Monthly Price Data 1980-2008

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

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

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

  24. 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

  25. Decision Trees Source: Usset, U. of Minnesota

  26. Decision Trees Source: Wisner, Iowa State University

  27. Class web site:http://www.econ.iastate.edu/classes/econ339/hart-lawrence/

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