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June 2013 PowerPoint Presentation

June 2013

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June 2013

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  1. June 2013 Steven D. Johnson Farm & Ag Business Management Specialist (515) 957-5790sdjohns@iastate.edu www.extension.iastate.edu/polk/farm-management

  2. Marketing Revenue Protection (RP) Guaranteed Bushels Source: Johnson, ISU Extension, June 2013

  3. Separate Bushels: Delivery vs. Non-Delivery • Revenue Protection = Insurance Bushels that can be committed to Delivery • Insurance Bushels = APH X Level of Coverage X Higher of Projected vs. Harvest Price (ie. acts like a subsidized Put Option) • Combine Insurance Bushelssold for Delivery along with the use of Futures and Options Strategies for Non-Delivery bushels. Source: Johnson, ISU Extension, June 2013

  4. Delivery of Corn Bushels with Revenue Protection (RP) • Marketing Strategy • Pre-Harvest Sell for Delivery up to 144 Bu/A • Price Guarantee is Higher of the Projected Price vs. Harvest Price • Slight Basis Risk • Must Plant the Crop • (Prevented Planting = 60%) Deductible 20% = 36 Bu/A RP @ 80% Level of Coverage 144 Bu/A Guarantee X $5.65/buProjected Price 180 Bu/A Actual Production History (APH) = $814/A Revenue Guarantee Source: Johnson, ISU Extension, March 2013

  5. Comparing 2013 Revenue GuaranteesAPH= 180 bu/A Corn, 50 bu/A SoybeansProjected Prices = $5.65/buCorn, $12.87/buSoybeans Source: Johnson, ISU Extension, March 2013

  6. Corn Revenue Protection @ 80%Final Yield: 100 bu/A vs. 200 bu/A YieldPrice: $5.65/bu Projected,$4.50/bu vs. $7.50/bu Harvest Pre-Harvest Sales 100 bu/A @ $5.30/bu Unpriced Bushels = Harvest Price - $.20/bu Basis $1,260 $960 $894 $860 Source: Johnson, ISU Extension, March 2013

  7. Corn Insurance Prices vs. Seasonal Highs Source: USDA Risk Management Agency & CME Group, Nov. 2012

  8. December Corn Futures Seasonals 2003-07 Average High $2.92 2008-12 Average High $5.90 Source: www.cmegroup.com, October 2012

  9. New Crop Corn Futures Chart Projected Price: February Average: $5.65/bu. Source: www.FuturesSource.com, June 5, 2013

  10. Soybean Revenue Protection @ 80%Final Yield: 30 bu/A vs. 60 bu/APrice: $12.87/bu Projected,$11/bu vs. $14/bu Harvest Pre-Harvest Sales30 bu/A @ $12.50/bu Unpriced Bushels = Harvest Price - $.50/bu Basis $780 $690 $560 $515 Source: Johnson, ISU Extension, March 2013

  11. Soybean Insurance Prices vs. Seasonal Highs Source: USDA Risk Management Agency & CME Group, Nov. 2012

  12. November Soybean Futures Seasonals 2008-12 Average High $13.10 2003-07 Average High $6.96 Source: www.cmegroup.com, October 2012

  13. New Crop Soybean Futures Chart Projected Price: February Average: $12.87/bu. Source: www.FuturesSource.com, June 5, 2013

  14. Pre-Harvest Marketing Thoughts • Revenue Protection preferred for sale of Crop Insurance Bushels = Delivery Bushels(Guaranteed Higher of Projected vs. Harvest Price) • Sell Delivery Bushels (Forward Cash Contract or HTA) when new crop futures are above the Projected Price (February average) • Generate adequate Cash Flow Needs for Fall 2013 through the Winter of 2013-14 • Sell Futures or Buy Put Options for Non-Delivery Bushels. Source: Johnson, ISU Extension, June 2013

  15. 5 Crop Insurance Strategies Keep Good Planting and Yield Records Work with your Crop Insurance Agent & Grain Merchandisers Use of Revenue Protection (RP) Crop Insurance; consider use of Hail/Wind Endorsements Caution for Selling Delivery Bushels if taking Prevented Planting Selling Some Guaranteed Insurance Bushels (Use the Spring and Summer Months) Source: Johnson, ISU Extension, June 2013

  16. 5 Crop Insurance Web Sites Ag Decision Maker – ISU Extension Econ (Decision Tools, Newsletters, Publications, Voiced Media, Monthly e-Newsletter) www.extension.iastate.edu/agdm USDA Risk Management Agency (RMA) www.rma.usda.gov Farm Doc – U. of Illinois Extension Econ www.farmdoc.illinois.edu Ag Manager – K-State Extension Econ www.agmanager.info Crop Risk Management - ISU Polk County (Crop Marketing Newsletter & Crop Insurance Updates, Webcasts) www.extension.iastate.edu/polk/farm-management Source: Johnson, ISU Extension, June 2013