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Southwest Risk Management Training for Priority Commodities

Southwest Risk Management Training for Priority Commodities. by Trent Teegerstrom Russell Tronstad Ursula Schuch Dept of Ag. & Resource Economics and Plant Sciences The University of Arizona, Tucson AZ. Arizona Risk Management Workshops. Topics Covered in Workshops.

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Southwest Risk Management Training for Priority Commodities

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  1. Southwest Risk Management Training for Priority Commodities by Trent Teegerstrom Russell Tronstad Ursula Schuch Dept of Ag. & Resource Economics and Plant Sciences The University of Arizona, Tucson AZ

  2. Arizona Risk Management Workshops

  3. Topics Covered in Workshops • Influence of Quality and Season on Hay Market Decisions • Ranch Restocking and Other Mgt Decisions • Record Keeping / Financial Risk Management • Hands On Computer Training: Some Basics for Any Business • Basic Financial Statements

  4. Example of Decision Tools • Crop Mix/Diversification • Long Term Herd Evaluation • Animal ID Systems • Farm and Ranch Cash Flow • Crop Insurance

  5. Forage Example

  6. Bulkiness of Alfalfa Relative to Other Field Crops, 2003 • 70% of hay is consumed on the farms & ranches where grown.

  7. U.S. Hay Prices by State, 2003 • Location • Dairy Feed Demands • Quality Wtg. Avg. $92.9/ton

  8. Alfalfa Prices, Yuma AZ, 1983-04

  9. $127 $114 $99 $87 $75 $68 Estimated Yuma Mean Price Seasonality • Hay Price is a function of: • lagged prices • seasonality (polynomial w/ constraints) • simultaneous error structure

  10. Yuma Price Seasonality & Variance

  11. Estimated Conditional Covariances Greatest Substitution

  12. Market Implications • Substitution: dairy vs. feedlots/horses • Prices below (above) long-term averages -- mean reverting • Volatility after August (low & OG) • Storing alfalfa in April has the lowest expected payout • Lower price volatility by going for highest quality -- cost/risk??

  13. Livestock Example

  14. Restocking Worksheet Herd Planning -- Multi-Year Restocking Path (5 yrs) -- 20-year returns in current dollars Multiyear Budgets -- Cash production and management costs Ranch Investments -- Amortization of assets.

  15. Avg. Real Steer Prices: Gila County Sale Inflation Adjusted Prices Declining --

  16. Biological Productivity Market Prices

  17. Capital Available Biological Productivity Initial Herd Market Prices Restocking Path

  18. Cummulative Returns Grazing Capacity

  19. Crop Example

  20. Inputs: Yields, Prices, & Costs Yields Prices Production Costs

  21. Max Profit Subject to Constraints Capital Acreage

  22. Monthly Water & Labor Constraints Water Use Water Flow Annual Water Limit

  23. Portfolio Risk on Revenues & Acres Revenues Acreage

  24. Absolute Dollar Risk Exposure Crop Insurance Dollars at Risk

  25. Solver to Maximize Solutions

  26. Acreage Mix of 3 Scenarios

  27. Profitability of 3 Scenarios

  28. Work To Date! • 12 Workshops and Presentations Across Arizona • 1299 Individuals Attended Workshops and Presentations • 694 of the 1299 Were Producers • 120 Individuals Received Hands-on Computer Training

  29. Western Centers Risk Mgt Project • Extended our Focus to Labor Mgt Issues in the Arizona Nursery and Landscape Industries

  30. Nursery Work

  31. Topics Covered in Workshops • Nursery marketing decisions • Reducing risk associated with musculo-skeletal disorders (WMSDs) • Heat stress management in the workforce • Communication between supervisers/foreman/workers

  32. Roles and Responsibilities of an Agricultural Employer Need to Be a Manager * Functions of Management * Types of Activity in Managerial RolesManagers’ TheoriesRecognizing and Managing RisksManaging for Compliance and BeyondEssentials for the ManagerGetting up and Keeping up as a Manager of People

  33. Convention Demonstrations

  34. Work To Date • Published and distributed bookmarks on Heat Stress Informational in English and Spanish • Heat Stress article in the American Nurseryman (national trade magazine) • Five Conference Presentations • Over 375 individuals receiving materials and training

  35. Questions and Comments?

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