ECON 337: Agricultural Marketing

transcript

Econ 337, Spring 2012

ECON 337:Agricultural Marketing

Chad HartAssistant Professorchart@iastate.edu515-294-9911

Today’s Topic

Marketing Plan Targets

Dec. Corn Futures

Source: CBOT, Futures Price for 2nd Fridayof the month

Nov Dec Jan Feb Mar Apr May June July Aug Sept Oct

1970's 1980's 1990's 2000's 2010's

Dec. Corn Futures

Nov Dec Jan Feb Mar Apr May June July Aug Sept Oct2000 2.34 2.28 2.49 2.52 2.52 2.53 2.64 2.40 1.94 1.87 1.96 2.082001 2.53 2.52 2.54 2.45 2.47 2.28 2.16 2.16 2.37 2.34 2.24 2.092002 2.46 2.40 2.39 2.31 2.30 2.19 2.22 2.26 2.33 2.62 2.76 2.542003 2.41 2.41 2.41 2.45 2.38 2.40 2.50 2.42 2.11 2.22 2.28 2.142004 2.48 2.50 2.53 2.81 2.95 3.11 2.85 2.80 2.52 2.28 2.22 2.072005 2.40 2.33 2.29 2.30 2.45 2.30 2.22 2.30 2.46 2.31 2.16 2.042006 2.43 2.41 2.49 2.57 2.63 2.71 2.82 2.68 2.77 2.42 2.46 3.152007 3.45 3.50 3.95 3.99 4.08 3.75 3.75 3.92 3.69 3.51 3.49 3.512008 4.32 4.51 5.13 5.30 5.75 6.04 6.50 7.65 6.29 5.18 5.63 4.032009 4.43 4.20 4.54 4.06 4.18 4.07 4.40 4.48 3.32 3.28 3.20 3.722010 4.37 4.38 4.06 3.97 3.94 3.94 3.80 3.71 3.95 4.27 4.78 5.632011 5.09 5.29 5.71 6.18 5.78 6.53 6.27 7.13 6.37 7.15 7.37 6.402012 5.74 5.52 5.55

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

Basis2000 -0.422001 -0.402002 -0.252003 -0.262004 -0.342005 -0.562006 -0.462007 -0.492008 -0.342009 -0.252010 -0.592011 -0.30

Marketing TypesHarvestAveragingPrice TargetTime and PriceExtended Time and Price

Marketing TypesHarvest

Takes the harvest price for 100% of their grain

Average Price CapturedHarvest

2000 1.662001 1.692002 2.292003 1.882004 1.732005 1.482006 2.692007 3.022008 3.692009 3.472010 5.042011 6.10

Average 2.90Min 1.48Max 6.10

Marketing TypesAveraging

Sells 10% of their grain via futures each month January-JulySells the remaining 30% at harvestSets basis at harvest

Dec. Corn Futures

Average Price CapturedHarvest Averaging

2000 1.66 1.912001 1.69 1.872002 2.29 2.112003 1.88 2.052004 1.73 2.242005 1.48 1.692006 2.69 2.352007 3.02 3.272008 3.69 5.132009 3.47 3.772010 5.04 3.842011 6.10 6.02

Average 2.90 3.02Min 1.48 1.69Max 6.10 6.02

Marketing TypesPrice Target

Sells 25% of grain via futures when futures price > production costSells 25% when futures > costs + $0.25Sells 25% when futures > costs + $0.50Sells remaining 25% at harvestSets basis at harvestDefaults to harvest sales when price objectives are not reachedWill start selling in the November before planting

Costs of Production

Source: Iowa State University Extension,Dr. Michael Duffy

Cost Cost + 25 Cost + 502000 2.52 2.77 3.022001 2.66 2.91 3.162002 2.65 2.90 3.152003 2.51 2.76 3.012004 2.67 2.92 3.172005 2.87 3.12 3.372006 2.94 3.19 3.442007 3.10 3.35 3.602008 3.65 3.90 4.152009 4.52 4.77 5.022010 3.52 3.77 4.022011 4.03 4.28 4.53

Dec. Corn Futures

Average Price CapturedHarvest Averaging Price Target

2000 1.66 1.91 1.772001 1.69 1.87 1.692002 2.29 2.11 2.352003 1.88 2.05 1.882004 1.73 2.24 2.142005 1.48 1.69 1.482006 2.69 2.35 2.692007 3.02 3.27 3.112008 3.69 5.13 4.162009 3.47 3.77 3.682010 5.04 3.84 3.872011 6.10 6.02 5.25

Average 2.90 3.02 2.84Min 1.48 1.69 1.48Max 6.10 6.02 5.25

Marketing TypesTime and Price

Sell 25% in MarchSell 25% in AprilSell 25% in MaySell 25% at harvestSets basis at harvestOnly make March-May sales if futures prices > production costsDefaults to harvest sales if price objectives are not reached

Dec. Corn Futures

Average Price CapturedHarvest Averaging Price Target Time and Price

2000 1.66 1.91 1.77 2.022001 1.69 1.87 1.69 1.692002 2.29 2.11 2.35 2.292003 1.88 2.05 1.88 1.882004 1.73 2.24 2.14 2.412005 1.48 1.69 1.48 1.482006 2.69 2.35 2.69 2.692007 3.02 3.27 3.11 3.282008 3.69 5.13 4.16 5.242009 3.47 3.77 3.68 3.472010 5.04 3.84 3.87 3.742011 6.10 6.02 5.25 5.94

Average 2.90 3.02 2.84 3.01Min 1.48 1.69 1.48 1.48Max 6.10 6.02 5.25 5.94

Marketing TypesExtended Time and Price

Sell 25% in March or when futures prices > production costsSell 25% in April or when futures prices > costs + $0.25Sell 25% in May or when futures prices > costs + $0.50Only make March-May sales if futures prices > costsSell remaining crop at harvestSets basis at harvestDefaults to harvest sales if price objectives are not reached

Dec. Corn Futures

Harvest Averaging Price Target Time and Price Extended Time and Price2000 1.66 1.91 1.77 2.02 2.022001 1.69 1.87 1.69 1.69 1.692002 2.29 2.11 2.35 2.29 2.352003 1.88 2.05 1.88 1.88 1.882004 1.73 2.24 2.14 2.41 2.332005 1.48 1.69 1.48 1.48 1.482006 2.69 2.35 2.69 2.69 2.692007 3.02 3.27 3.11 3.28 3.112008 3.69 5.13 4.16 5.24 4.162009 3.47 3.77 3.68 3.47 3.682010 5.04 3.84 3.87 3.74 3.872011 6.10 6.02 5.25 5.94 5.25

Average 2.90 3.02 2.84 3.01 2.88Min 1.48 1.69 1.48 1.48 1.48Max 6.10 6.02 5.25 5.94 5.25

Average Price Captured

Lowest AverageHarvest Averaging Price Target Time and Price Extended Time and Price

2000 1.66 1.91 1.77 2.02 2.022001 1.69 1.87 1.69 1.69 1.692002 2.29 2.11 2.35 2.29 2.352003 1.88 2.05 1.88 1.88 1.882004 1.73 2.24 2.14 2.41 2.332005 1.48 1.69 1.48 1.48 1.482006 2.69 2.35 2.69 2.69 2.692007 3.02 3.27 3.11 3.28 3.112008 3.69 5.13 4.16 5.24 4.162009 3.47 3.77 3.68 3.47 3.682010 5.04 3.84 3.87 3.74 3.872011 6.10 6.02 5.25 5.94 5.25

8 2 4 5 4

Highest AverageHarvest Averaging Price Target Time and Price Extended Time and Price

2000 1.66 1.91 1.77 2.02 2.022001 1.69 1.87 1.69 1.69 1.692002 2.29 2.11 2.35 2.29 2.352003 1.88 2.05 1.88 1.88 1.882004 1.73 2.24 2.14 2.41 2.332005 1.48 1.69 1.48 1.48 1.482006 2.69 2.35 2.69 2.69 2.692007 3.02 3.27 3.11 3.28 3.112008 3.69 5.13 4.16 5.24 4.162009 3.47 3.77 3.68 3.47 3.682010 5.04 3.84 3.87 3.74 3.872011 6.10 6.02 5.25 5.94 5.25

3 4 2 5 3

Longer HistoryHarvest Averaging Price Target Time and Price Extended Time and Price

Average 2.40 2.51 2.43 2.50 2.45Min 1.14 1.41 1.14 1.14 1.14Max 6.10 6.02 5.25 5.94 5.25

Low Price 23 8 6 10 9High Price 9 8 4 15 10

Out of 36 years (1976-2011)

Class web site:http://www.econ.iastate.edu/~chart/Classes/econ337/Spring2012/

Lab in Heady 68

ECON 337: Agricultural Marketing

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