ECON 339X: Agricultural Marketing

Econ 339X, Spring 2011

ECON 339X:Agricultural Marketing

Chad HartAssistant [email protected]

John [email protected]


Today’s Topic

Marketing Plan Targets


Dec. Corn Futures

2.40

2.50

2.60

2.70

2.80

2.90

3.00

3.10

3.20

3.30

3.40

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

$ pe

r bus

hel

1980's 1990's 2000's

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


Dec. Corn Futures


Nov Dec Jan Feb Mar Apr May June July Aug Sept Oct2000 2.335 2.283 2.488 2.523 2.52 2.528 2.635 2.395 1.943 1.873 1.955 2.082001 2.53 2.518 2.543 2.45 2.47 2.278 2.16 2.155 2.365 2.343 2.243 2.0852002 2.455 2.395 2.393 2.313 2.295 2.19 2.22 2.255 2.328 2.615 2.763 2.5432003 2.413 2.405 2.41 2.448 2.38 2.398 2.495 2.418 2.11 2.215 2.28 2.1432004 2.478 2.495 2.528 2.813 2.948 3.11 2.85 2.8 2.523 2.283 2.223 2.0682005 2.395 2.333 2.285 2.303 2.45 2.295 2.218 2.303 2.463 2.31 2.16 2.0352006 2.433 2.413 2.488 2.573 2.63 2.708 2.818 2.678 2.768 2.418 2.46 3.1452007 3.448 3.503 3.945 3.993 4.078 3.748 3.745 3.923 3.685 3.505 3.49 3.512008 4.315 4.505 5.133 5.3 5.75 6.04 6.5 7.65 6.285 5.183 5.633 4.032009 4.43 4.2 4.543 4.055 4.18 4.07 4.398 4.478 3.315 3.278 3.198 3.722010 4.37 4.383 4.06 3.973 3.938 3.943 3.8 3.71 3.953 4.273 4.783 5.632011 5.093 5.293 5.713 6.183 5.778 6.53


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 0.3952002 0.2532003 0.2632004 0.3382005 0.5552006 0.4552007 0.492008 0.342009 0.252010 0.592011


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 5.04

Average 2.60Min 1.48Max 5.04


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 3.84

Average 2.60 2.75Min 1.48 1.69Max 5.04 5.13


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 3.87

Average 2.60 2.75 2.62Min 1.48 1.69 1.48Max 5.04 5.13 4.16


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 3.74

Average 2.60 2.75 2.62 2.74Min 1.48 1.69 1.48 1.48Max 5.04 5.13 4.16 5.24


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 3.87

Average 2.60 2.75 2.62 2.74 2.66Min 1.48 1.69 1.48 1.48 1.48Max 5.04 5.13 4.16 5.24 4.16

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 3.87

8 2 3 5 3


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 3.87

2 4 2 5 3


Longer History

Harvest Averaging Price Target Time and Price Extended Time and PriceAverage 2.30 2.41 2.35 2.41 2.37Min 1.14 1.41 1.14 1.14 1.14Max 5.04 5.13 4.16 5.24 4.16

Low Price 23 8 5 9 8High Price 7 8 4 15 10

Out of 35 years (1976-2010)


Class web site:http://www.econ.iastate.edu/~chart/Classes/econ339/Spring2011/

http://www.econ.iastate.edu/~chart/Classes/econ339/Spring2011/

http://www.econ.iastate.edu/~chart/Classes/econ339/Spring2011/

ECON 339X: Agricultural Marketing

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