1 / 37

Volatility Gives Rise to Fear, Greed, and Ego

Volatility Gives Rise to Fear, Greed, and Ego. Farmers Forum III West Point, Nebraska February 11, 2009 Chad Hart Assistant Professor/Grain Markets Specialist chart@iastate.edu 515-294-9911. Price Shifts (Jan. 2007 = 1). Price Shifts (Sept. 2008 = 1). Changes in Price Volatility.

leyna
Download Presentation

Volatility Gives Rise to Fear, Greed, and Ego

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Volatility Gives Rise to Fear, Greed, and Ego Farmers Forum III West Point, Nebraska February 11, 2009 Chad Hart Assistant Professor/Grain Markets Specialist chart@iastate.edu 515-294-9911

  2. Price Shifts (Jan. 2007 = 1)

  3. Price Shifts (Sept. 2008 = 1)

  4. Changes in Price Volatility Source: Zulauf and Roberts, Ohio State

  5. Historical Soybean Volatility Changes Source: Zulauf and Roberts, Ohio State

  6. Historical Wheat Volatility Changes Source: Zulauf and Roberts, Ohio State

  7. Overall Shift Source: Zulauf and Roberts, Ohio State

  8. Source: Zulauf and Roberts, Ohio State

  9. Source: Zulauf and Roberts, Ohio State

  10. Source: Zulauf and Roberts, Ohio State

  11. Source: Zulauf and Roberts, Ohio State

  12. Source: Zulauf and Roberts, Ohio State

  13. Source: Zulauf and Roberts, Ohio State

  14. World Stocks-to-Use Ratios

  15. World Wheat Stats

  16. World Corn Stats

  17. World Soybean Stats

  18. Factors Leading to Higher Commodity Prices Source: USDA-ERS, Trostle, July 2008

  19. Population Source: U.S. Bureau of the Census

  20. Liquid Fuel Use 2004 Million Barrels Oil Equivalent per Day United States 20.7 Canada 2.3 Mexico 2.0 Europe 15.6 Japan 5.4 China 6.4 India 2.5 Africa 2.8 Central and South America 5.4 World 82.5 2010 2015 2020 2025 2030 Percent of 2004 Value 103 109 115 121 129 100 100 104 104 104 110 115 130 135 145 99 99 100 101 101 96 96 96 96 96 147 164 186 213 245 108 128 144 160 176 118 139 154 164 175 120 137 152 167 180 110 118 126 134 143 Source: EIA, International Energy Outlook 2007

  21. Countries Pursuing Biofuels • US • Brazil • Argentina • Colombia • Paraguay • Canada • Uruguay • Mexico • Thailand • New Zealand • South Africa • South Korea • Philippines • Indonesia • Pakistan • China • India • Malaysia • Australia • Japan • EU • Russia • Not a complete list

  22. Iowa Corn Prices vs. Costs Source: USDA-NASS and Duffy and Smith, http://www.extension.iastate.edu/agdm/crops/pdf/a1-21.pdf

  23. Iowa Soybean Prices vs. Costs Source: USDA-NASS and Duffy and Smith, http://www.extension.iastate.edu/agdm/crops/pdf/a1-21.pdf

  24. Ammonia Prices Source: http://www.fertilizerworks.com/html/market/ TheMarket.pdf

  25. Average Producer-Paid PremiumsNebraska Wheat

  26. Average Producer-Paid PremiumsNebraska Corn

  27. Average Producer-Paid PremiumsNebraska Soybeans

  28. Fear, Greed, and Ego Fear of making a bad decision -- Watching prices slip away as you wait Greed of expecting even higher prices -- Not taking advantage of good price opportunities Ego of wanting to claim you caught the market high -- “Lake Wobegon” marketing Much of the following discussion comes from the online Advanced Grain Marketing course from Iowa State University

  29. Ego Greed Fear

  30. Marketing Plan To avoid fear, greed, and ego dominating your marketing, have a plan and stick to it. A marketing plan outlines your market strategy and your marketing objectives. It should examine marketing opportunities before and after harvest.

  31. Marketing Objectives • Get the highest selling price • Pretty tough to do • More realistic objective: Obtain better than average prices • Reduce price risk • Cover cash flow needs • Minimize tax liability Look at short and long-term goals for your business

  32. Building a Marketing Plan 5 basic steps: • Estimate number of bushels to sell • Calculate breakeven price • Project price and yield scenarios • Compare pricing tools and analyze market opportunities • Develop a pricing plan

  33. Bushels to Sell • What’s your expected production? • What do you have in storage? • What about on-farm use? Breakeven Costs • What are your production costs? • What are your storage costs? • On-farm vs. off-farm? • What are your cash flow needs?

  34. Scenarios • Seasonal price trends • Weather outlook • Export picture • Livestock outlook Tools and Opportunities • Market tools: Futures, options, forward contracts • Government tools: Crop insurance, marketing loans, CCP/ACRE

  35. Tentative Pricing Plan • Outline realistic pricing targets • Have periodic price targets and quantities to sell • Have patience and be willing to reevaluate price goals • Remember it’s hard to lose money when making a profit

  36. Some Examples University of Nebraska: “Achieving Success with a Business Plan: Case Study to Prepare a Grain Farm Business Plan (CC424) University of Missouri: http://extension.missouri.edu/explore/agguides/agecon/g00600.htm Purdue University: http://www.agecon.purdue.edu/extension/sbpcp/resources/mrktplan.xls AgRisk website: http://www.agrisk.umn.edu/library1/a0000037.pdf

  37. Thank you for your time!Any questions?My web site:http://www.econ.iastate.edu/faculty/hart/Iowa Farm Outlook:http://www.econ.iastate.edu/outreach/agriculture/periodicals/ifo/Ag Decision Maker:http://www.extension.iastate.edu/agdm/

More Related