ECON 339 X Agricultural Marketing Chad Hart Assistant

ECON 339 X: Agricultural Marketing Chad Hart Assistant Professor chart@iastate. edu 515 -294 -9911 Econ 339 X, Spring 2011 John Lawrence Professor jdlaw@iastate. edu 515 -294 -7801

Today’s Topic Marketing Plan Targets Econ 339 X, Spring 2011

Dec. Corn Futures Econ 339 X, Spring 2011 Source: CBOT, Futures Price for 2 nd Friday of the month

Dec. Corn Futures Econ 339 X, Spring 2011 Source: CBOT, Futures Price for 2 nd Friday of the month

Basis Harvest basis from December corn futures for average cash prices for Iowa corn on the 2 nd Friday of October, in $/bushel. Econ 339 X, Spring 2011

Marketing Types ØHarvest ØAveraging ØPrice Target ØTime and Price ØExtended Time and Price Econ 339 X, Spring 2011

Marketing Types ØHarvest ØTakes the harvest price for 100% of their grain Econ 339 X, Spring 2011

Average Price Captured Econ 339 X, Spring 2011

Marketing Types ØAveraging ØSells 10% of their grain via futures each month January-July ØSells the remaining 30% at harvest ØSets basis at harvest Econ 339 X, Spring 2011

Dec. Corn Futures Econ 339 X, Spring 2011 Source: CBOT, Futures Price for 2 nd Friday of the month

Average Price Captured Econ 339 X, Spring 2011

Marketing Types ØPrice Target ØSells 25% of grain via futures when futures price > production cost ØSells 25% when futures > costs + $0. 25 ØSells 25% when futures > costs + $0. 50 ØSells remaining 25% at harvest ØSets basis at harvest ØDefaults to harvest sales when price objectives are not reached ØWill start selling in the November before planting Econ 339 X, Spring 2011

Costs of Production Econ 339 X, Spring 2011 Source: Iowa State University Extension, Dr. Michael Duffy

Dec. Corn Futures Econ 339 X, Spring 2011 Source: CBOT, Futures Price for 2 nd Friday of the month

Average Price Captured Econ 339 X, Spring 2011

Marketing Types ØTime and Price ØSell 25% in March ØSell 25% in April ØSell 25% in May ØSell 25% at harvest ØSets basis at harvest ØOnly make March-May sales if futures prices > production costs ØDefaults to harvest sales if price objectives are not reached Econ 339 X, Spring 2011

Dec. Corn Futures Econ 339 X, Spring 2011 Source: CBOT, Futures Price for 2 nd Friday of the month

Average Price Captured Econ 339 X, Spring 2011

Marketing Types ØExtended Time and Price ØSell 25% in March or when futures prices > production costs ØSell 25% in April or when futures prices > costs + $0. 25 ØSell 25% in May or when futures prices > costs + $0. 50 ØOnly make March-May sales if futures prices > costs ØSell remaining crop at harvest ØSets basis at harvest ØDefaults to harvest sales if price objectives are not reached Econ 339 X, Spring 2011

Dec. Corn Futures Econ 339 X, Spring 2011 Source: CBOT, Futures Price for 2 nd Friday of the month

Average Price Captured Econ 339 X, Spring 2011

Lowest Average Econ 339 X, Spring 2011

Highest Average Econ 339 X, Spring 2011

Longer History Econ 339 X, Spring 2011

Class web site: http: //www. econ. iastate. edu/~chart/Classes/econ 339/ Spring 2011/ Econ 339 X, Spring 2011