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Agricultural Producer Risk Management

Agricultural Producer Risk Management. Optimizing Client Success Tom Neher VP AgriBusiness AgStar Financial Services November 4, 2011. Risk Management?. What could go wrong?. 2008 High was due to US housing collapse. What if the same happens in China?

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Agricultural Producer Risk Management

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  1. Agricultural Producer Risk Management Optimizing Client Success Tom Neher VP AgriBusiness AgStar Financial Services November 4, 2011

  2. Risk Management?

  3. What could go wrong? • 2008 High was due to US housing collapse. What if the same happens in China? • Increase US regulations on futures or limits on large speculative traders positions • Perfect 2012 US/World weather

  4. Current grain market factors • Volatility and Money flow • China commodity demand • World economic and currency outlook • 2012 weather, Russia, China, USA, Argentina • Soybeans now the bull leader? • US Demand, export and domestic use • US/World 2012 acreage mix

  5. VISULIZE ACTIVITIES WITH TIMELINES! Market & Policy Volatility: Fasten Your Seat Belts NOW FUTURE BEFORE Volatility China impact Risk Mgmt. 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 World crop woes - Lower U.S. stocks U.S. elections Hurricane Katrina Financial crisis Tax reform Dealing with U.S. debt Earlier timeline? More plantings needed- Food & energy prices - State finance problems Energy, food prices rise Financial crisis actions Pres. Bush boosts ethanol

  6. Fundamental Factors in the formation of Prices World Macro-Economic Conditions Basic supply/ demand input Weather Market China Investments Long term US/World supply needs

  7. Producer Risk Management

  8. Paradigm Shift • Trading Approach • Predict were the markets will go • Sell the top • Buy the low • Margin Management • Cost of Production • Financial Goals • Reward the Market

  9. AgStar Margin Manager

  10. AgStar Margin Manager Calculators • Crop Insurance • Equipment • Facility • Land • Margin Projection

  11. Risk Management Today:6 Tips for Balancing Your Inner Bull and Bear

  12. 6 Tips to Finding Balance • Weigh the rewards of action versus inaction • Beware the power of regret • Keep confidence in check • Build robustness • Risk management is the key to leveraging the opportunities • Master the practice of “laying risk off onto others.”

  13. Viewpoint • Bulls focus on the opportunities • Bears focus on the risk • Takes discipline to find a healthy balance

  14. Thank You! Tom Neher VP AgriBusiness AgStar Financial Services, ACA Tom.Neher@agstar.com 507-696-3614

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