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Econ 337, Spring 2012 ECON 337: Agricultural Marketing Chad Hart Assistant Professor [email protected] u 515-294-9911
Econ 337, Spring 2012
Today’s Topic
Marketing Plan Targets
Econ 337, Spring 2012
Dec. Corn Futures
Source: CBOT, Futures Price for 2nd Fridayof the month
2.00
2.50
3.00
3.50
4.00
4.50
5.00
5.50
6.00
6.50
Nov Dec Jan Feb Mar Apr May June July Aug Sept Oct
$ pe
r bus
hel
1970's 1980's 1990's 2000's 2010's
Econ 337, Spring 2012
Dec. Corn Futures
Source: CBOT, Futures Price for 2nd Fridayof the month
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
Econ 337, Spring 2012
Basis
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
Econ 337, Spring 2012
Marketing TypesHarvestAveragingPrice TargetTime and PriceExtended Time and Price
Econ 337, Spring 2012
Marketing TypesHarvest
Takes the harvest price for 100% of their grain
Econ 337, Spring 2012
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
Econ 337, Spring 2012
Marketing TypesAveraging
Sells 10% of their grain via futures each month January-JulySells the remaining 30% at harvestSets basis at harvest
Econ 337, Spring 2012
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
Dec. Corn Futures
Source: CBOT, Futures Price for 2nd Fridayof the month
Econ 337, Spring 2012
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
Econ 337, Spring 2012
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
Econ 337, Spring 2012
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
Econ 337, Spring 2012
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
Dec. Corn Futures
Source: CBOT, Futures Price for 2nd Fridayof the month
Econ 337, Spring 2012
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
Econ 337, Spring 2012
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
Econ 337, Spring 2012
Dec. Corn Futures
Source: CBOT, Futures Price for 2nd Fridayof the month
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
Econ 337, Spring 2012
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
Econ 337, Spring 2012
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
Econ 337, Spring 2012
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
Dec. Corn Futures
Source: CBOT, Futures Price for 2nd Fridayof the month
Econ 337, Spring 2012
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
Econ 337, Spring 2012
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
Econ 337, Spring 2012
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
Econ 337, Spring 2012
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)
Econ 337, Spring 2012
Class web site:http://www.econ.iastate.edu/~chart/Classes/econ337/Spring2012/
Lab in Heady 68
