Edward Usset Grain Marketing Specialist, U of M Columnist

1. Edward Usset Grain Marketing Specialist, U of M Columnist usset001@umn.edu Corn & Soybean Digest Ed’s World blog Center for Farm Financial Management http://edsworld.wordpress.com/ www.cffm.umn.edu

2. Grain Marketing is Simple …your check-off dollars at work

3. A premier on-line trading game, features real time cash, futures and options quotes • Unlike other trading websites, Commodity Challenge highlights marketing decisions and risk management tools (not speculation) • Educational and free! www.commoditychallenge.com

4. Grain Marketing is Simple • Grain marketing is simple • (it’s just not easy) • Post-harvest marketing plans

5. Try a Different Approach Find the dime! Have a plan Eliminate mistakes

6. Find the Dime! The average farm earns 20-30 cents/bu. A dime could increase income by 33-50%! Not ambitious enough? Try to find three or four dimes!

7. Have a plan A marketing plan is a proactive strategyto price grain that considers financial goals, storage capacity, appetite for risk, etc. Proactive, not reactive, not overactive

8. Eliminate Mistakes Great marketing is not finding the high price - it’s finding an extra 10-30 cents/bu. with a solid plan that avoids mistakes.

9. Quiz Time! Was that the second Golden Age of American Agriculture?

10. The Golden Age of American Agriculture • About the first Golden Age… • the decade leading up to and during World War I • “average gross income of farms more than doubled, and the value of these farms more than tripled” Louis Hilden, circa 1918

11. The Golden Age of American Agriculture 1910-1914 became benchmark years for calculating “parity” (price and profit levels on par with the Golden Age) Anna and Lars Hilden, circa 1918

14. If that was the second Golden Age, it may be time to get back to the basics of marketing.

15. Grain Marketing is Simple • Grain marketing is simple • (it’s just not easy) • Post-harvest marketing plans Let’s look for the “simple” in our celebrity marketing styles before and after harvest

16. Pre-Harvest Marketing

17. Celebrity producers searching for a pre-harvest marketing advantage… Barney Binless prices grain at harvest Grandma’s sales are timing driven, no minimum price

18. Celebrity producers searching for a pre-harvest marketing advantage… Justin Price makes sales based on prices Terry Timer’s sales are timing driven, with a minimum price

19. Celebrity producers searching for a pre-harvest marketing advantage… Peter Paperfarmer follows Terry, but re-owns each sale with call options Darla Discipline combines price objectives and decision dates

20. Searching for a Pre-Harvest AdvantageCorn, 1990-2013 * Out of 24 years

21. Searching for a Pre-Harvest AdvantageCorn, 1990-2013 Due to crop insurance limitations, each of the players has a piece of the harvest price in their price. For example, Terry’s weighted average price includes no more than 75% from pre-harvest sales and 25% (or more) from harvest sales.

22. Searching for a Pre-Harvest AdvantageCorn, 1990-2013 Everybody beat Barney!

23. What about this year?Corn 2014 (preliminary) Only Grandma was able to get anything done!

24. Searching for a Pre-Harvest AdvantageSoybeans, 1990-2013 * Out of 24 years

25. Searching for a Pre-Harvest AdvantageSoybeans, 1990-2013 Terry, Grandma and Peter beat Barney!

26. What about this year?Soybeans 2014 (preliminary) Everybody will beat Barney!

27. What can we conclude from our celebrity search for a pre-harvest advantage? • Everybody with a plan found the dime • Everybody with a plan beat the harvest price • Have a plan!

28. Corn 2015Pre-Harvest Marketing Plan Draft Objective: Buy crop insurance to protect my production risk and price 75% of my anticipated corn crop (per APH yield)by early June.Price 10,000 bushels at $4.75 cash price ($5.25 Dec. futures) using forward contract/futures hedge/HTA contractPrice 10,000 bushels at $5.15c/5.65f, or by March 5, pricing tool tbdPrice 10,000 bushels at $5.55c/6.05f, or by April 4, pricing tool tbdPrice 15,000 bushels at $5.95c/6.45f, or by May 4, pricing tool tbdPrice 10,000 bushels at $6.35c/6.85f, or by May 18, pricing tool tbd Price 10,000 bushels at $6.75c/7.25f, or by June 2, pricing tool tbd Plan starts on January 1, 2015. Earlier sales may be made at a 50 cent premium and would be limited to 30,000 bushels. Ignore decision dates and make no sale if prices are lower than $4.75 local cash price/$5.25 December futures. Exit all options positions by mid-September 2015.

29. Soybeans 2015 Pre-Harvest Marketing Plan Draft Objective: Buy crop insurance to protect my production risk and price 75% of my anticipated soybean crop (per APH yield) by early June. Price 5,000 bushels at $10.75 cash price ($11.45 Nov. futures) using forward contract/futures hedge/HTA contract Price 2,500 bushels at $11.50c/12.20f, or April 4, pricing tool tbd Price 5,000 bushels at $12.25c/12.95f, or by May 4, pricing tool tbd Price 5,000 bushels at $13.00c/13.70f, or by June 2, pricing tool tbd Plan starts on January 1, 2015. Earlier sales may be made at a 75 cent premium and would be limited to 10,000 bushels. Ignore decision dates and make no sale if prices are lower than $10.75 local cash price/$11.45 November futures. Exit all options positions by mid-September 2015.

30. Post-Harvest Marketing

31. Celebrity producers take the post-harvest marketing challenge… Barney Binless has no storage and sells grain at harvest Peter Paperfarmer follows Barney, but re-owns with call options

32. Celebrity producers take the post-harvest marketing challenge… May Sellers holds grain in storage to sell in late spring Hank Holder holds grain in storage too long

33. Celebrity producers take the post-harvest marketing challenge… Sally Sellthecarry Large carry:Store and sell the carry. Small carry: sell at harvest. Earl Eitheror Large carry:Store and sell the carry. Small carry: Store and sell in spring.

34. Taking the Post-Harvest Challenge Corn, 1990-2012 * Out of 23 years

35. Taking the Post-Harvest Challenge Corn, 1990-2012 Due to on-farm storage limitations, each of the players has a piece of the harvest price in their price. For example, May’s weighted average price includes 80% from the sale of grain in May (net of storage costs) and 20% from harvest price sales.

36. Taking the Post-Harvest Challenge Corn, 1990-2012 Not everybody beats Barney!

37. What about this year?Corn 2013 (preliminary) Hank and Peter bring up the rear!

38. Taking the Post-Harvest Challenge Soybeans, 1990-2012 * Out of 23 years

39. Taking the Post-Harvest Challenge Soybeans, 1990-2012 Not everybody beats Barney!

40. What about this year? Soybeans 2013 (preliminary) Earl and May ride high (again)!

41. What can we conclude from our celebrity results in the post-harvest challenge? • Not everybody with a plan found the dime • Not everybody with a plan beat the harvest price • What would Earl do?

42. Decision Tree for Sizing Up the Market

43. Grain Marketing is Simple • Grain marketing is simple • (it’s just not easy) • Post-harvest marketing plans Marketing is simple - why isn’t it easy? Because prices are low and nothing is 100%

44. Nothing is 100%

45. In 2012, Barney found the advantage before harvest in corn because nothing is 100%!

46. In 2011, Hank found the advantage after harvest in corn because nothing is 100%!

47. In2011, Hank found the advantage after harvest in soybeans because nothing is 100%!

48. Prices are low

49. Corn 2015Pre-Harvest Marketing Plan Draft Objective: Buy crop insurance to protect my production risk and price 75% of my anticipated corn crop (per APH yield)by early June.Price 10,000 bushels at $4.75 cash price ($5.25 Dec. futures) using forward contract/futures hedge/HTA contractPrice 10,000 bushels at $5.15c/5.65f, or by March 5, pricing tool tbdPrice 10,000 bushels at $5.55c/6.05f, or by April 4, pricing tool tbdPrice 15,000 bushels at $5.95c/6.45f, or by May 4, pricing tool tbdPrice 10,000 bushels at $6.35c/6.85f, or by May 18, pricing tool tbd Price 10,000 bushels at $6.75c/7.25f, or by June 2, pricing tool tbd Plan starts on January 1, 2015. Earlier sales may be made at a 50 cent premium and would be limited to 30,000 bushels. Ignore decision dates and make no sale if prices are lower than $4.75 local cash price/$5.25 December futures. Exit all options positions by mid-September 2015. Dec’15 corn futures are currently trading @ $4.10!

50. Soybeans 2015 Pre-Harvest Marketing Plan Draft Objective: Buy crop insurance to protect my production risk and price 75% of my anticipated soybean crop (per APH yield) by early June. Price 5,000 bushels at $10.75 cash price ($11.45 Nov. futures) using forward contract/futures hedge/HTA contract Price 2,500 bushels at $11.50c/12.20f, or April 4, pricing tool tbd Price 5,000 bushels at $12.25c/12.95f, or by May 4, pricing tool tbd Price 5,000 bushels at $13.00c/13.70f, or by June 2, pricing tool tbd Plan starts on January 1, 2015. Earlier sales may be made at a 75 cent premium and would be limited to 10,000 bushels. Ignore decision dates and make no sale if prices are lower than $10.75 local cash price/$11.45 November futures. Exit all options positions by mid-September 2015. Nov’15 soybean futures are currently trading @ $10.80!