Grain Marketing
101
Shannon Dill
Jenny Rhodes
Extension Educator, Ag & Natural Resources
Extension Educator, Ag & Natural Resources
University of Maryland Cooperative Extension University of Maryland Cooperative Extension
Talbot County
Queen Anne’s County
Objectives
Marketing Terminology
Where to get Grain Marketing Information
Making Trading Decisions
Marketing terminology
Futures Price
The price of a particular futures contract at a specified point in time.
Determined by open competition between buyers and sellers
This is the national price set for grain
This is the price that all grain is quoted on nationally
Most futures contracts do not result in physical delivery.
Marketing terminology
 Cash Price
This is the local price quoted for grain by individual buyers such as a
grain elevator
Determined by the local need of a commodity
Cash/forward contracts results in delivery
Marketing Terminology
 Basis
 is the difference between a cash price and a futures price of a
particular commodity on a given futures exchange.
 It is calculated as:
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Futures price - Cash price = Basis
Basis can be positive or negative
Determined by the supply and demand locally
Marketing Contracts
Most Common – Used by farmers and requires delivery
 Forward Contract
 is a contract for the cash sale of grain at a specified price for future delivery.
 Hedge to Arrive
 Is a contract for the cash sale of grain which locks in the futures price at the
date of contracting, the basis can be locked in later.
 Basis Contract
 is an agreement between a producer and grain elevator (or feedlot) that
specifies the cash price upon future delivery as a fixed amount in relation to
the futures price (above or below), thus fixing the basis
Marketing Contracts
Advanced – Anyone can trade requires broker, margins and 5,000
bushel contracts
Used by anyone
 Futures Contract
 is a transferrable contract traded on a futures exchange
 Most futures contracts do not result in physical delivery. An
offsetting transaction usually occurs prior to delivery and any
price differences are settled in cash.
 Options – Put or Call Contracts, trading tools for creating a price
floor or upside potential.
Grain Prices and Information
Web resources:
Chicago Board of Trade now the CME Group
http://www.cmegroup.com/trading/agricultural/
Ag Web
http://www.agweb.com/markets
Lots of other commentary and local elevators
Popular press and market experts
Marketing terminology
Bear
is a person who expects lower prices.
Bearish Market
is a market in which prices are declining.
Bull
is a person who expects higher prices.
Bullish Market
is a market in which prices are increasing.
Marketing terminology
Futures month
◦ The month at which the future trade
◦ Corn
◦ Harvest – Dec
◦ Store - JFM
◦ Soybeans
◦ Harvest - Nov
◦ Store - JFM
◦ Wheat
◦ Harvest - July
Crop Insurance Update 2016
SAMANTHA STEELE
Things To Consider in 2016
Enterprise Units By Practice
Trend Adjustment (TA)
APH Yield Exclusion (YE)
Beginning Farmers & Ranchers Benefits (BFR)
Whole Farm Revenue Protection (WFRP)
Strategies For This Year
WOMEN IN AG CONFERENCE 2016
Enterprise Units By Practice
Insuring Irrigated/ Non-Irrigated at different levels
Resulting in better risk management & premium discounts
Prevents the offset of a loss from high production on IRR acres
Works great for heavily irrigated farms
TO QUALIFY
Must maintain separate records for IRR/NIRR
(Visible break/pattern when planting or use of precision technology)
Must be planted on two Farm Serial Numbers (FSN) & at least 20% or 20 acres on the FSN’s of the
total planted acres
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Trend Adjustment (TA)
Reflects increases in yield over time in the county
Designed to improve APH databases that could be up to 20 years old
TA based on the county's historical yield trend
◦ Provided by RMA’s actuarial documents
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APH Yield Exclusion (YE)
Excludes actual yields from your APH
◦ Years determined by RMA
◦ Crop years where the simple average is below 50 percent
Years differ from crop to crop
Producers have the option to not exclude a yield
WOMEN IN AG CONFERENCE 2016
Beginning Farmers & Rancher Benefits
(BFR)
Supports producers just beginning to farm
Must have not actively been engaged in a farm for more than five years
(owner-operator, landlord, tenant, share cropper)
BENEFITS
Exempt from administrative fees
Additional 10% points in premium subsidy
Increase in substituted yield
Use of production history from farm producer was previously involved
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**New**
Whole Farm Revenue Protection (WFRP)
First policy available in every county in the U.S.
Combination of Adjusted Gross Revenue (AGR) & AGR-Lite
◦ With improvements from a review and surveys
Provides whole-farm risk management under one policy
◦ Available up to $8.5 Million for all commodities produced on the farm
◦ Diversified, specialty, and organic commodities (crops/livestock) all covered
Coverage levels 50-85%
◦ 3 commodities required for 80-85% coverage
◦ The more diversified the higher subsidy
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What's Covered?
Covers loss of approved revenue from all commodities on the farm
◦ Loss based solely on overall revenue
◦ Includes animals, animal products, commodity purchases fro resale (up to 50% of total)
◦ Excludes timber, forest products, animals for sport, show or pets
Replant costs covered (with approval)
Historic revenue adjusted to reflect a farm expansion
Producers can still buy other MPCI policies
◦ Claims will be counted at earned income under WFRP
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The Basics of WFRP
Well suited for:
◦ Highly diverse farms
◦ Farms with specialty commodities
Insurance Period: Producers tax year
Based off your last five years of farm tax forms
Several Farm Operation Reports
◦ WFRP version of acreage reports
Claims are not paid until following spring
WOMEN IN AG CONFERENCE 2016
Using Crop Insurance to Manage Your
Risk in 2016
Opportunities to profit in 2016 will be scarce leaving little room for error
Makes Crop Insurance that more important
Develop a strategy for your specific needs
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Lock in a high price
Protect your pre-harvest marketing plan
Satisfy your loan requirements
Cover your input costs
Peace of Mind
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Upcoming Dates to Remember
February 15th Sales Closing for Green Peas
March 15th Sales Closing for Spring Crops
◦ Corn, Soybeans, Grain Sorghum, Lima Beans, Snap Beans, Sweet Corn, Tomatoes, Cucumbers, Whole Farm
Revenue Protection
March 31st Green Pea Production Reports Due
April 15th Spring Crop Production Reports Due
◦ Corn, Soybeans, Grain Sorghum, Lima Beans, Snap Beans, Sweet Corn, Tomatoes, Cucumbers, Whole Farm
Revenue Protection
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Talk to your agent to decide the best risk management
plan for your operation.
Samantha Steele
302-752-6134
sam@wellerins.com
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Marketing tools
 Using Crop Insurance
 This allows you to contract with confidence
 https://extension.umd.edu/grainmarketing/crop-insurance
Crop Budgets
 Need to know cost of production
 Need to know break-even price you must receive
 http://extension.umd.edu/grainmarketing/crop-budgets
Crop Budgets
Marketing Plan
 Winning the Game – Center
for Farm Financial
Management
 Set a minimum price
 Set decision dates to make
pricing decisions
Thank You!
SHANNON DILL
SDILL@UMD.EDU
410-822-1244
JENNY RHODES
JRHODES@UMD.EDU
410-758-0166
HT TPS://EXTENSION.UMD.EDU/GRAINMARKETING