Agricultural Producer Risk
Management
Optimizing Client Success
Tom Neher VP AgriBusiness
AgStar Financial Services
November 4, 2011
Risk Management?
What could go wrong?
• 2008 High was due to US housing collapse.
What if the same happens in China?
• Increase US regulations on futures or limits on
large speculative traders positions
• Perfect 2012 US/World weather
Current grain market factors
•
•
•
•
•
•
•
Volatility and Money flow
China commodity demand
World economic and currency outlook
2012 weather, Russia, China, USA, Argentina
Soybeans now the bull leader?
US Demand, export and domestic use
US/World 2012 acreage mix
VISULIZE ACTIVITIES WITH TIMELINES!
Market & Policy Volatility: Fasten Your Seat Belts
NOW
Volatility
BEFORE
China impact
2005
2006
2007
2008
2009
2010
2011
FUTURE
Risk Mgmt.
2012
2013
2014
12
/3
1/
07
3/
31
/0
6/ 8
30
/0
9/ 8
30
/0
8
12
/3
1/
08
3/
31
/0
6/ 9
30
/0
9/ 9
30
/0
9
12
/3
1/
09
3/
31
/1
0
6/
30
/1
7/ 0
30
/1
8/ 0
31
/1
9/ 0
30
/1
0
10
/3
0/
10
Billions of US Dollars
Source: CFTC Index
Investm ent Data Report
All Reported Markets
Grains (Corn, Soybean, Soyoil, Chi & KC Wheat)
54.5
46.8
42.3
41.2
36.3
33.6
31.2
25.8
27
22.2
22.6
31.2
48.6
39.1
112.4
112.4
255.9
254.7
241.5
212.3
224.4
212.3
215.9
211.2
178.5
163
175.6
209.9
175.6
300
275
250
225
200
175
150
125
100
75
50
25
0
33.9
Index Investment Data - Long Positions
Swap Dealers and Index Traders
Basic supply/
demand input
World MacroEconomic
Conditions
Weather
China
Investments
Long term US/World
supply needs
Producer Risk Management
Paradigm Shift
• Trading Approach
– Predict were the markets will go
– Sell the top
– Buy the low
• Margin Management
– Cost of Production
– Financial Goals
– Reward the Market
AgStar Margin Manager
AgStar Margin Manager Calculators
• Crop Insurance
• Equipment
• Facility
• Land
• Margin Projection
Risk Management Today:
6 Tips for Balancing Your Inner Bull
and Bear
6 Tips to Finding Balance
1.
2.
3.
4.
5.
Weigh the rewards of action versus inaction
Beware the power of regret
Keep confidence in check
Build robustness
Risk management is the key to leveraging
the opportunities
6. Master the practice of “laying risk off onto
others.”
Viewpoint
• Bulls focus on the opportunities
• Bears focus on the risk
• Takes discipline to find a healthy
balance
Thank You!
Tom Neher
VP AgriBusiness
AgStar Financial Services, ACA
Tom.Neher@agstar.com
507-696-3614