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ECON 337: Agricultural Marketing

ECON 337: Agricultural Marketing. Chad Hart Assistant Professor chart@iastate.edu 515-294-9911. Marketing Plan Targets. Today’s Topic. Dec. Corn Futures. Source: CBOT, Futures Price for 2 nd Friday of the month. Dec. Corn Futures. Source: CBOT, Futures Price for 2 nd Friday

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ECON 337: Agricultural Marketing

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  1. ECON 337: Agricultural Marketing Chad Hart Assistant Professor chart@iastate.edu 515-294-9911

  2. Marketing Plan Targets Today’s Topic

  3. Dec. Corn Futures Source: CBOT, Futures Price for 2nd Friday of the month

  4. Dec. Corn Futures Source: CBOT, Futures Price for 2nd Friday of the month

  5. Basis Harvest basis from December corn futures for average cash prices for Iowa corn on the 2nd Friday of October, in $/bushel.

  6. Marketing Types • Harvest • Averaging • Price Target • Time and Price • Extended Time and Price

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

  8. Average Price Captured

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

  10. Dec. Corn Futures Source: CBOT, Futures Price for 2nd Friday of the month

  11. Average Price Captured

  12. 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

  13. Costs of Production Source: Iowa State University Extension, Dr. Michael Duffy

  14. Dec. Corn Futures Source: CBOT, Futures Price for 2nd Friday of the month

  15. Average Price Captured

  16. 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

  17. Dec. Corn Futures Source: CBOT, Futures Price for 2nd Friday of the month

  18. Average Price Captured

  19. 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

  20. Dec. Corn Futures Source: CBOT, Futures Price for 2nd Friday of the month

  21. Average Price Captured

  22. Lowest Average

  23. Highest Average

  24. Longer History

  25. Class web site: http://www.econ.iastate.edu/~chart/Classes/econ337/Spring2012/ Lab in Heady 68

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