1. Agricultural Marketing
ECON 337:
Agricultural Marketing
Chad Hart
Associate Professor 1

2. Office Hours: By appointment Class web site:
Class Time: TR 9:30-10:20am
East 119
Lab Time: T 2:10-4:00pm
Heady 68
Office Hours: By appointment
Class web site:
Chad Hart
Associate Professor
Heady 478F 2 2

3. Course reading and resource materials will be available online
Guidelines and rules:
No cell phone calls or texting in class or lab
Labs are difficult to reschedule
Class attendance is recommended
Course reading and resource materials will be available online
Grading:
Two exams %
Homework assignments and quizzes 30%
Marketing plan project and report 30% 3 3

4. Course objectives:
Understand the use of futures, options, and other tools in marketing and risk management decisions
Understand the use of cash sales and contracts and the role of basis, storage, and transportation in determining prices
Know the various sources of agricultural data information and the roles these data play within the commodity markets
Understand the forces that shape commodity markets and learn about market/price forecasting
Design an integrated production and marketing plan for farms and agribusinesses 4 4

5. Marketing
A series of events and services to create, modify, and transport a product from initial creation to consumption
Possible steps:
Planning
Production
Inspection
Transport
Storage
Processing
Sale
Market players:
Producers
Elevators
Processors
Transport companies
Banks/Insurance companies
Traders
Feeders 5 5

6. Market Functions Location Where do you want it? Time Form
Price discovery
Where do you want it?
When do you want it?
How do you want it?
What will you pay for it? 6 6

7. Cash Markets A market where physical commodities are traded
Local elevators
Ethanol plants & soybean crushers
River terminals
Feeders/feed mills 7 7

8. Futures Markets
A market where contracts for physical commodities are traded, the contracts set the terms of quantity, quality, and delivery
Chicago: Corn, soybeans, cattle, hogs
Along with wheat (soft red), oats, rice
Kansas City: Wheat (hard red winter)
Minneapolis: Wheat (hard red spring)
Tokyo: Corn, soybeans, coffee, sugar
Has a market for Non-GMO soybeans
Other markets in Argentina, Brazil, China, and Europe 8 8

9. The Cash and Futures Markets Are Related
Basis = Cash price – Futures price Rearranging terms: Cash price = Futures price + Basis So national (and international) events can affect local prices

10. Market Activities Pricing the commodity Establishing contracts
Merchandising the commodity among uses
Transporting the products
Storing the products
Managing and controlling the products
Managing production and price risks 10 10

11. Price Determination and Discovery
is the broad forces of supply and demand establishing a market clearing price for a commodity.
Price Discovery
is the process by which buyers and sellers arrive at a specific price for a given lot of produce at a given location for a specific time period.

12. Price Determination and Price DiscoveryPe D Q Qe

13. Futures Markets Organized and centralized market
Today’s price for products to be delivered in the future
A mechanism of trading promises of future commodity deliveries among traders

14. Futures and Options Market tools to help manage (share) price risks
Mechanisms to establish commodity trades among participants at a future time
Available from commodity exchanges / futures markets

15. Agricultural Futures Markets
Has some unique features due to the nature of agricultural businesses
Supply comes online a few times during the year
So at harvest, supply spikes, then diminishes until the next harvest
Production decisions are based price forecasts
Planting decisions can be made a full year (or more) before the crop price is realized
Users provide year-round demand
Livestock feeding, biofuel production, food demand 15 15

16. Futures Market Exchanges
Competitive markets
Open out-cry and electronic trading
Centralized pricing
Buyers and sellers are both in the market
Relevant information is conveyed through the bids and offers for the trades
Bid = the price at which a trader would buy the commodity
Offer = the price at which a trader would sell the commodity 16 16

17. Futures Market Exchanges
Modern futures market began long ago
Chicago Board of Trade
Chicago Mercantile Exchange
CME Group merged CBOT and CME
Highly regulated markets
Commodity Futures Trading Commission (CFTC)

18. The View from the Corn Pit
Source: M. Spencer Green, AP Photo 18 18

19. Class web site: Lab in Heady 68 @ 2:10pm.
Lab in Heady 2:10pm.