Copyright © 2004 Center for Farm Financial Management, University of Minnesota WTG1 Gain the Pre-Harvest Marketing Advantage WTG2 Launch Your Marketing Plan WTG3 The Post-Harvest Challenge Three programs in the Series:

Copyright © 2004 Center for Farm Financial Management, University of Minnesota Common Elements of Programs ü3 hour program üIncludes participant game üDesigned to deliver a few key take-home messages üDelivered using a sponsor model

Copyright © 2002 Center for Farm Financial Management, University of Minnesota

Copyright © 2004 Center for Farm Financial Management, University of Minnesota WORKSHOP THEME " Pre-harvest marketing pays and crop insurance is the tool that allows you to do it with comfort "

Copyright © 2004 Center for Farm Financial Management, University of Minnesota Agenda üIntroduction üPlaying The Game üSeasonality of Grain Markets üImpact of Crop Insurance Decisions üResults of The Game

Copyright © 2004 Center for Farm Financial Management, University of Minnesota üSince Fall Original game and workshop concept were developed by Roger Selley & Doug Jose, University of Nebraska. They have conducted 56 workshops for 994 participants üSince Fall Winning the Game delivered in Minnesota, 99 workshops for 3209 participants. History

Copyright © 2004 Center for Farm Financial Management, University of Minnesota ü Country Hedging in cooperation with the U of MN – 47 workshops with 1,500 participants (OH, IN, MO, CO, KS, OK, WI) History

Copyright © 2004 Center for Farm Financial Management, University of Minnesota Farm for the Game üA 1200 acre farm with 600 acres of corn üWe provide a 17 year yield history üThey have a yes/no choice on 70% CRC üNine opportunities to sell from the first week of April through the last week in July in two week intervals üAny corn not forward contracted is sold at harvest

Copyright © 2004 Center for Farm Financial Management, University of Minnesota Playing the Game Forward Pricing for Harvest Delivery Name CRC? YesNo (Circle one) ID#99 WeekDate 14-Apr____,000 Forward Pricing for Harvest Delivery Name WeekDate ID# Apr____,000

Copyright © 2004 Center for Farm Financial Management, University of Minnesota 3:00 The First Decision üFind your input sheet üDecide whether to purchase CRC insurance or not. Please circle yes or no üYou have 3 minutes 2:00 1:000:100:00

Copyright © 2004 Center for Farm Financial Management, University of Minnesota Market Report - April 4 One advisory service indicates corn can continue higher as long as the market is trading anything short of an ideal growing season. Current corn planting intentions show a 1.4 million acreage decline from February numbers, but still up 1.9 million from the previous year. Corn belt weather was wet last month but is forecast to be ideal this month. Current forward contract price is $ 2.09 /bu.

Copyright © 2002 Center for Farm Financial Management, University of Minnesota Seasonality of Grain Markets

Copyright © 2004 Center for Farm Financial Management, University of Minnesota Pre-harvest marketing is very important!! On average, the March to May time period offers good forward pricing opportunities. Crop insurance allows us to forward price with confidence. Your local loan rate establishes a minimum forward pricing objective. A Different Approach to Marketing

Copyright © 2004 Center for Farm Financial Management, University of Minnesota Year1-May1-OctChange (0.90) (0.73) (0.26) (0.39) (0.27) (0.03) (0.26) (0.42) (0.41) (0.44) (0.44) (0.20) (0.58) (0.26) (0.63) (0.16) Ave (0.17) December Corn, years (70%) the market declined, an average of 40 cents/bu. 7 years (30%) the market improved, an average of 37 cents/bu.

Copyright © 2004 Center for Farm Financial Management, University of Minnesota But remember your minimum price….

Copyright © 2002 Center for Farm Financial Management, University of Minnesota Impact of Crop Insurance Decisions

Copyright © 2004 Center for Farm Financial Management, University of Minnesota Life Insurance üHow many of you have life insurance? üDo you hope to collect on your insurance this year?

Copyright © 2004 Center for Farm Financial Management, University of Minnesota Health Insurance üHow many of you have health insurance? üDo you have the best insurance money can buy? üWhat if the government paid part of the premium?

Copyright © 2004 Center for Farm Financial Management, University of Minnesota

WORKSHOP THEME " Pre-harvest marketing pays and crop insurance is the tool that allows you to do it with comfort "

Copyright © 2004 Center for Farm Financial Management, University of Minnesota Evaluation Average % Forward PricedCorn Soybeans Previous Max22.5%9.4% New Expected Max55.6%52.1% Increase33.1%34.6%

Copyright © 2004 Center for Farm Financial Management, University of Minnesota Follow-up Evaluation % Actually Forward PricedCorn Soybeans 2001 Crop Max16.1%9.4% 2002 Crop Max43.7%33.6% Increase27.6%24.2%

Copyright © 2004 Center for Farm Financial Management, University of Minnesota üExplore the Key Elements of a Pre-Harvest Marketing Plan üDevelop your own Marketing Plan üUse your Plan in a Simulation Game

Copyright © 2004 Center for Farm Financial Management, University of Minnesota ü Game and workshop concept developed & tested by Ed Usset, Wynn Richardson, & Bob Craven, U of MN. üSince Fall Minnesota educators have delivered 38 workshops with 975 participants the past two winters. History

Copyright © 2004 Center for Farm Financial Management, University of Minnesota ü Iowa State University partnered with Iowa Farm Bureau to deliver 61 workshops with 1,650 participants. History

Copyright © 2004 Center for Farm Financial Management, University of Minnesota What is a Marketing Plan? ü A marketing plan is a proactive strategy to price your grain that considers your financial goals, cash flow needs, price objectives, storage capacity, crop insurance coverage, anticipated production, and appetite for risk Proactive, not reactive, not overactive

Copyright © 2004 Center for Farm Financial Management, University of Minnesota Marketing is Important! ü Iowa State University studies show that since 1998 the average Iowa farm has earned cents/bushel (including gov’t payments). ü Marketing strategies that increase the net price received by just 10 cents per bushel could increase net income by 33-50%!! We get there by eliminating mistakes!

Copyright © 2004 Center for Farm Financial Management, University of Minnesota Objective: Buy crop insurance to protect my production risk, and have 70% of my insured (APH) corn crop priced by late May. Price 10,000 bushels at $2.00 cash price ($2.50 Dec. futures) using fixed-price tool (forward contract/futures hedge/futures fixed contract). Price 10,000 bushels at $2.12, or by Mar.18, using some form of fixed-price tool. Price 10,000 bushels at $2.24, or by April 16, using some form of fixed-price tool. Price 10,000 bushels at $2.36, or by April 30, consider options or a trend system. Price 10,000 bushels at $2.48, or by May 16, consider options or a trend system. Price 10,000 bushels at $2.60, or by May 30, consider options or a trend system. Plan starts on November 1, Earlier sales will be made at a 15 cent premium to price targets noted above. Ignore decision dates and make no sale if prices are lower than $2.00 local cash price/$2.50 December futures. Exit all options positions by mid-September. (1) Pricing targets (2) Decision dates (3) Trump cards (4) Baseline prices Key Elements of a Pre-Harvest Marketing Plan

Copyright © 2004 Center for Farm Financial Management, University of Minnesota Objective: Buy crop insurance to protect my production risk, and have 70% of my insured (APH) corn crop priced by late May. Price 10,000 bushels at $2.00 cash price ($2.50 Dec. futures) using fixed-price tool (forward contract/futures hedge/futures fixed contract). Price 10,000 bushels at $2.12, or by Mar.18, using some form of fixed-price tool. Price 10,000 bushels at $2.24, or by April 16, using some form of fixed-price tool. Price 10,000 bushels at $2.36, or by April 30, consider options or a trend system. Price 10,000 bushels at $2.48, or by May 16, consider options or a trend system. Price 10,000 bushels at $2.60, or by May 30, consider options or a trend system. Plan starts on November 1, Earlier sales will be made at a 15 cent premium to price targets noted above. Ignore decision dates and make no sale if prices are lower than $2.00 local cash price/$2.50 December futures. Exit all options positions by mid-September. Key Elements of a Pre-Harvest Marketing Plan

Copyright © 2004 Center for Farm Financial Management, University of Minnesota Now get ready for the game by writing your own marketing plan! Think of your own operation, but for corn use 84,000 bushels for total expected production. For wheat use 25,000 bushels.

Copyright © 2004 Center for Farm Financial Management, University of Minnesota Before we play the game, you need to make your plan! Objective: Buy crop insurance to protect my production risk, and have ___% of my insured (APH) corn crop priced by late May. Price ______ bushels at $______ cash price ($_______ Dec. futures) using ___________. Price ______ bushels at $______, or by _______, using __________________________. Price ______ bushels at $______, or by _______, using __________________________. Price ______ bushels at $______, or by _______, using __________________________. Plan starts on __________________. Earlier sales will be made at a _________ cent premium to price targets noted above. Ignore decision dates and make no sale if prices are lower than $_________ local cash price/$_________ December futures.

Copyright © 2004 Center for Farm Financial Management, University of Minnesota

üA plan is discipline - plan your trades, then trade your plan üA plan is proactive, not reactive, and not overactive ü Pre-harvest marketing is very important – history supports it and you have upside price potential in a lower market ü Crop insurance is confidence ü Set pricing targets and decision dates, track your baseline price ü The use of options and technical trading tools (trump cards) offer flexibility with discipline. Use selectively! Launch Your Marketing Plan Summary

Copyright © 2004 Center for Farm Financial Management, University of Minnesota üHave you ever developed a pre-harvest marketing plan? Yes 49.4%No 50.6% Have you implemented your plan? Yes 10.5%No 89.5% As a result of this workshop do you plan to develop & implement a plan? Yes 100%No 0% Evaluations

Copyright © 2004 Center for Farm Financial Management, University of Minnesota Sponsor Model üSponsor responsibilities: Provide the location/facilities Provide eats and treats Promote the workshop locally Pay the University $600 üUniversity responsibilities: Provide promotion materials to sponsor Present the workshop Provide the participant materials

Copyright © 2004 Center for Farm Financial Management, University of Minnesota Sponsor Model -- Advantages üReduced transaction costs on income üLocal presence for promotion, advertising & partnership üEliminates local meeting arrangements üLower financial risk with low turn out üCover direct program costs – travel, printing, etc. üPressure on presenters to deliver quality program

Copyright © 2004 Center for Farm Financial Management, University of Minnesota Sponsor Model – Requirements for Success üRequires a quality program – name recognition helps üAggressive promotion to potential sponsors üProvide sponsors with promotional tools üMake sure sponsors understand their responsibility üAssist with statewide promotion

Copyright © 2004 Center for Farm Financial Management, University of Minnesota Sponsor Model – Challenges üPrivate vs. public meetings üLogistics of sponsor care – promotion, billing, follow-up

Copyright © 2004 Center for Farm Financial Management, University of Minnesota Reasons for Success üSimple message üFun game üWell packaged turn-key program üBroad support from commodity organizations üGood teaching teams