Maryland Eastern Shore Team
Shannon Dill – Talbot
Jenny Rhodes – Queen Anne’s
Sudeep Mathews – Dorchester
John Hall - Kent
National Women in Ag Conference
March 23-24, 2010
Baltimore, Maryland
University of Maryland Extension

• Game of probability
• Our game was for traditional row crop grain production.
• Plugged in crops
• Crop budgets
• Yields with excellent, average and below average
• Rainfall varied
• Prices from excellent, to average, to low
• Program develops 100 different probabilities / years
• You choose which year when you start to play

Remember - Adult Education
• The Name “ Right Risk”– Was little intimidating without explanation
“Managing a 800 acre grain farm in
Maryland”
• You must engage the learner
University of Maryland Extension

Right Risk - A Critical Look at Ag Profitability:
This program provides an in-depth look at various financial outcomes on a traditional 800 acre grain farm in Maryland. It will allow you to objectively look at the probability of various outcomes affecting profitability in the format of a computerized farming simulation. The presentation will enable you to rethink decisions such as crop insurance, grain marketing and crop rotations in your farm operation.
It is a hands-on learning experience with an easy to use computer program that helps make the decisions and at the end of the scenario calculates your levels of risk as well as potential profits and losses.
Participants have enjoyed the process. Please call to register. We have limited seating and computers.

Farmers / learners must be in comfort zone
You must assure them that they can do this
If you engage them properly, it is a great exercise
University of Maryland Extension

Dr. Wes Musser got 12 lapt
University of Maryland Extension

- What is Risk?
- What Risks do you take in your farming operation?
- What do you do to minimize Risk in your operation?
University of Maryland Extension



Sources of Risk
• Production yield/quality variability ( weather )
• Marketing changes in price/external conditions
• Financial variability in debt/equity capital and ability to meet cash demands
Legal responsibilities for contracts, statutory compliance, tort liability, and business structure
Human managing people and estate transfers
8

Crop mix / rotation
Variety selection Yield and disease resistance
Crop Insurance
Labor – timely planting and harvesting
Tillage / Equipment
Marketing consultant
University of Maryland Extension

Financial goal
Maximize income potential?
Maximize income in down years.
University of Maryland Extension

Swine Producer
Put Corn through your pigs.
University of Maryland Extension

Good year – sell excess corn
University of Maryland Extension

Swine Producer
Drought year – Buy feed!
University of Maryland Extension

Challenge
Can I sell corn?
Swine Producer
Can I forward contract corn in the spring?
Will I have a crop?
University of Maryland Extension

What will the moisture be this growing season?
Will we get sufficient rain
Will it be another drought?
University of Maryland Extension

Chesapeake Maryland Farm
– Corn
– Soybeans
– Wheat
University of Maryland Extension

Repeat
• Repeat – Repeat –Repeat
• We often forget this!
University of Maryland Extension

Extension Educators
Jenny Rhodes, Queen Anne’s County
Shannon Dill, Talbot County
John Hall, Kent County
Sudeep Mathew, Dorchester County
University of Maryland Extension

Farm
• 800 acres
– Corn
• Planted in April/May
• Harvested September/November
– Soybeans
• Full season Double Crop
– Planted May Planted June/July
– Harvested September/November Harvested Sept/Nov
– Wheat
• Planted September/ October
• Harvested June/July
University of Maryland Extension

Risk Management Decision
1. Number of acres of crops to plant
2. Crop Insurance Coverage
3. Forward Contracting
4. Crop Storage
University of Maryland Extension

Typical Chesapeake MD Farm
Double Crop Production
Crop Acres
Normal Wheat Yields
250 acres
80 bushels per acre
Bushels Wheat Expected 20,000 bushels
Normal Soybean Yields 25 bushels per acre
Bushels Soybeans Expected 6,250 bushels
Production Costs $482.35
University of Maryland Extension

Typical Chesapeake MD Farm
Corn Production
Crop Acres 400 acres
Normal Annual Yields 125 bushels per acre
Bushels Corn Expected 50,000 bushels
Production Costs $394.70
University of Maryland Extension

Typical Chesapeake MD Farm
Full Season Soybean Production
Crop Acres
Normal Annual Yields
150 acres
45 bushels per acre
Bushel Soybean Expected 6,750 bushels
Production Costs $264.14
University of Maryland Extension

Typical Farm Income
Income:
Total income crop sales $401,660
Government program pmts $ 20,000
Less:
Expenses
Net Income
-$318,091
$103,569
University of Maryland Extension

Storage and Contracting
• No commodities in storage at present time
• Farm considers storage options
– At end of Harvest Season
• Forward Contracting
– Throughout the year
University of Maryland Extension

•
Decisions
Year 1
– Period 1 Jan 1 to March 14
• Crop Mix
• Crop Insurance
– 1. No Insurance
– 2. CAT Coverage
– 3. CRC (Crop Revenue Coverage) 60%
– 4. CRC 70%
– 5. CRC 80%
University of Maryland Extension

•
Decision
Year 1
– Period 2 March 15 to June 15
• Forward Price Corn
• Forward Price Soybeans
University of Maryland Extension

Decisions
• Year 1
– Period 3 June 16 to Sept 15
• Forward Price Corn
• Forward Price Soybeans
University of Maryland Extension

•
Decisions
Year 1
– Period 4 Sept 16 to Dec 31
• Post Harvest Storage-Corn & Beans
– 1. Sell all uncontracted crop at market price
– 2. Store 25%
– 3. Store 40% Storage .35/bu until March
– 4. Store 50%
• Wheat Planting Acres
– 1. 150 acres 2. 250 acres 3. 400 acres
University of Maryland Extension

Decisions
Year End
• Price Stored Commodities
1. Don’t price
2. Price 25%
3. Price 50%
4. Price 75%
5. Price 100%
University of Maryland Extension

• Year 2
• Period 5
• Period 6
• Period 7
• Period 8
Decisions
Same as Year 1
Same as Year 1
Same as Year 1
Same as Year 1
University of Maryland Extension

University of Maryland Extension

1. We passed out a information sheet
Information sheets covered the farm again
2. Then we went through the first year with them so they could see what they were going to do
University of Maryland Extension

34

35

36

Year 1
Period 1
Period 2
Period 3
Period 4
Year End
Decision
Adjust Crop Mix
Buy Crop Insurance
Forward Price Corn
Forward Price Soybeans
Forward Price Corn
Forward Price Soybeans
Store up to 50% of production
Adjust Wheat Acres
Forward Price Stored Crops
37

38

What strategy did your team follow?
• Do nothing
(computer decides)
• Contracting
• Storage
• Tried a little of everything
• Traditional
• Gamble – risk seeking
• Other ???
39

Evaluations Using Turning Point
Technologies
University of Maryland Extension

Which one of the following best describes you?
3%
0%
3% 10%
23%
61%
Producer
Extension Educator
Ag Lender
Student
Gov’t Agency
Other

How critical do you consider the issue of risk management in today’s agriculture operations?
Not Critical 3,13%
Somewhat
Critical
3%
Very Critical
0% 20% 40% 60% 80%
93,75%
100%

70%
60%
50%
40%
30%
20%
10%
0%
Overall, how helpful do you think this RightRisk Workshop has been?
63%
34,38%
3,13%
Very Helpful Somewhat Helpful Not Helpful

Will you change any of your Risk Management strategies after attending this workshop?
16,13%
29%
Yes
Maybe
No
54,84%

How likely are you to use RightRisk on the internet?
9%
27,27%
Yes
Maybe
No
63,64%

Gender of Participants
20%
80%
Male
Female
Do you use the Internet for your ag operation?
13%
Yes
No
87%

• Right Risk has been played at:
– Regional Women in Agriculture Conference
– Farm Credit Staff Meetings
– Grain Marketing Meetings

• Right Risk is a terrific learning tool
• We must get them to understand that this is only 1 year “ probability “
• They must understand that they need to play 5 – 10 years to really understand the best strategy for them
• We must remember our clientele
1. We must advertise it so people understand what it is
2. We must get learner in comfort zone
3. We must repeat – repeat – repeat

Risk Management
Without Losing the
Farm
John P. Hewlett
Farm/Ranch Management Specialist
– University of Wyoming
Dr. Jay Parsons
Risk Management Specialist
– Colorado State University
A product of: the
RightRisk
49
Education Team

Thank you!
University of Maryland Extension