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Agricultural Marketing and Ag Credit School in Ames, Iowa

Join us on June 16, 2016, for a discussion on agricultural marketing strategies and ag credit at the Ames Ag Credit School. Learn about market participants, marketing tools, and targets for success. Explore helpful resources and data on crop supplies, demands, and seasonal patterns. Discover different marketing types and strategies for maximizing profits. Don't miss this opportunity to enhance your understanding of agricultural marketing. Contact Chad Hart at chart@iastate.edu or 515-294-9911 for more information.

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Agricultural Marketing and Ag Credit School in Ames, Iowa

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  1. Let’s Talk about Agricultural Marketing Ag Credit School Ames, Iowa June 16, 2016 Chad Hart Associate Professor/Crop Markets Specialist chart@iastate.edu 515-294-9911

  2. Marketing A series of events and services to create, modify, and transport a product from initial creation to consumption Possible steps: Market participants: • Producers • Elevators • Processors • Transport companies • Banks • Insurance companies • Traders • Feeders • Planning • Production • Inspection • Transport • Storage • Processing • Sale

  3. Marketing Tools There are 4 basic tools that cover most crop marketing moves, and usually the move is a combination of these tools. • Cash Sales • Forward Contracts • Futures • Options

  4. Marketing Targets Successful marketing can be defined in many ways, but some targets are more meaningful than others. • Highest Price • Covering Expenses • Long-term Profitability

  5. Ag Decision Maker www.extension.iastate.edu/agdm/

  6. Fact Sheets, Spreadsheets, & More

  7. Iowa Commodity Challenge www.extension.iastate.edu/agdm/info/icc.html

  8. Iowa Farm Outlook www2.econ.iastate.edu/ifo/

  9. Grain Marketing E-Course www.extension.iastate.edu/ames/agm.htm

  10. ISU Farm Management Specialists www.extension.iastate.edu/ag/farm-management-0

  11. Market Fundamentals Data examining the balance between crop supplies and crop demands When demand is relatively stronger, price rise When supply is relatively stronger, price fall

  12. Crop Supplies

  13. Crop Demands

  14. USDA Data Reports World Ag Supply and Demand Estimates Crop Production Crop Progress Prospective Plantings Acreage Grain Stocks

  15. Seasonal Patterns • A price pattern that repeats itself with some degree of accuracy year after year. • Often sound reasons for the patterns • Supply and demand timing • Linked to storage cost or basis patterns

  16. Crop Price Seasonal Patterns Source: USDA, NASS, Monthly Price Data 1980-2015

  17. Iowa Corn Prices vs. Costs

  18. Iowa Soybean Prices vs. Costs

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

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

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

  22. Average Price Captured

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

  24. Dec. Corn Futures

  25. Average Price Captured

  26. 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

  27. Costs of Production Source: Iowa State University Extension

  28. Dec. Corn Futures

  29. Average Price Captured

  30. 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

  31. Dec. Corn Futures

  32. Average Price Captured

  33. 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

  34. Dec. Corn Futures

  35. Average Price Captured

  36. Lowest Average

  37. Highest Average

  38. Longer History

  39. Iowa Corn Prices vs. Costs

  40. Iowa Soybean Prices vs. Costs

  41. Thank you for your time!Any questions?My web site:http://www.econ.iastate.edu/~chart/Iowa Farm Outlook:http://www.econ.iastate.edu/ifo/Ag Decision Maker:http://www.extension.iastate.edu/agdm/

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