Murphy Brown Grower Market Outlook
2/4/15
Advance Trading
Bloomington ,IL
Commodity Correlation Matrix
2009: Argentina crop
experiences major drought
US Dollar Index
CORN
How big was the 2014 crop?
How big was the 2014 crop?
2009: Argentina crop
experiences major drought
Corn Balance Sheet: Supply & Demand
1/14/2015
CORN
USDA2
USDA2
2014/15
USDA Jan
2015/16
Planted Acres (myn a)
Harvested Acres
Abandonment
Yield
Beginning Stocks
Production
Imports
Total Supply & Impts
Feed/Residual
Food, Seed, Industrial
Ethanol for Fuel
Domestic Use, Total
Exports
Total Use
2012/13
97.3
87.4
-10.2%
123.1
989
10,755
160
11,904
4,315
6,038
4,641
10,353
730
11,083
2013/14
95.4
87.5
-8.3%
158.1
821
13,829
36
14,686
5,036
6,501
5,134
11,537
1,917
13,454
2014/15
90.6
83.1
-8.3%
171.0
1,232
14,216
25
15,472
5,275
6,570
5,175
11,845
1,750
13,595
Poor
90.6
83.1
-8.3%
171.0
1,232
14,216
25
15,473
5,228
6,544
5,114
11,772
1,500
13,272
Trend
90.6
83.1
-8.3%
171.0
1,232
14,216
25
15,473
5,278
6,618
5,214
11,896
1,725
13,622
High
90.6
83.1
-8.3%
171.0
1,232
14,216
25
15,473
5,328
6,744
5,314
12,072
1,750
13,822
Trend
88.5
81.3
-8.1%
167.2
1,851
13,593
30
15,475
5,336
6,565
5,175
11,901
1,800
13,701
Ending Stocks
U.S. Stocks/Use Ratio
821
7.4%
1,232
9.2%
1,877
13.8%
2,201
16.6%
1,851
13.6%
1,651
11.9%
1,774
12.9%
Expected CZ Range
Expected Avg Farm PriceRange
NA
$6.89
2 USDA Jan
Report changes:
Yield dn 0.3bpa
Production dn 191
NA
$4.46
$3.25-$5.75
$3.35-$3.95
$3.26
$3.25-$5.75 $3.25-$5.75 $3.25-$5.75
$3.46
$3.66
$3.25
World and US Corn - Stocks to Use Ratio
33% 32%
32%
30%
28%
30% 29%
28%
25% 25%
29%
25%
24%
25%
20%
20%
19%
17%
11%
19%
18%
16%
15%
14%
15%
20%
19%
16%
17%
12%
13%
16%
14%
14%
13%
9%
10%
20%
18% 18%
18%
17%
15%
20%
11%
10%
19%
19%
9%
9%
8%
7%
12/13
30%
11/12
35%
5%
5%
World Stocks to Use
US Stocks to Use
14/15
13/14
10/11
09/10
08/09
07/08
06/07
05/06
04/05
03/04
02/03
01/02
00/01
99/00
98/99
97/98
96/97
95/96
94/95
93/94
92/93
91/92
90/91
0%
Corn Demand: Exports
1/14/2015
CORN
USDA2
USDA2
2014/15
USDA Jan
2015/16
Planted Acres (myn a)
Harvested Acres
Abandonment
Yield
Beginning Stocks
Production
Imports
Total Supply & Impts
Feed/Residual
Food, Seed, Industrial
Ethanol for Fuel
Domestic Use, Total
Exports
Total Use
2012/13
97.3
87.4
-10.2%
123.1
989
10,755
160
11,904
4,315
6,038
4,641
10,353
730
11,083
2013/14
95.4
87.5
-8.3%
158.1
821
13,829
36
14,686
5,036
6,501
5,134
11,537
1,917
13,454
2014/15
90.6
83.1
-8.3%
171.0
1,232
14,216
25
15,472
5,275
6,570
5,175
11,845
1,750
13,595
Poor
90.6
83.1
-8.3%
171.0
1,232
14,216
25
15,473
5,228
6,544
5,114
11,772
1,500
13,272
Trend
90.6
83.1
-8.3%
171.0
1,232
14,216
25
15,473
5,278
6,618
5,214
11,896
1,725
13,622
High
90.6
83.1
-8.3%
171.0
1,232
14,216
25
15,473
5,328
6,744
5,314
12,072
1,750
13,822
Trend
88.5
81.3
-8.1%
167.2
1,851
13,593
30
15,475
5,336
6,565
5,175
11,901
1,800
13,701
Ending Stocks
U.S. Stocks/Use Ratio
821
7.4%
1,232
9.2%
1,877
13.8%
2,201
16.6%
1,851
13.6%
1,651
11.9%
1,774
12.9%
Expected CZ Range
Expected Avg Farm PriceRange
NA
$6.89
2 USDA Jan
NA
$4.46
$3.25-$5.75
$3.35-$3.95
$3.26
$3.25-$5.75 $3.25-$5.75 $3.25-$5.75
$3.46
$3.66
$3.25
YTD Corn Exports Shipped by Destination
359mbu total
1000
Source: USDA Export Sales
Week:
900
18
800
292
M bu
700
309
600
500
400
231
223
164
227
214
90
76
23
52
300
200
312
100
284
142
208
87
97
93
131
322
333
329
380
208
191
55
221
13
35
433
304
317
88
0
355
5
24
259
129
119
0
UNK
W Hemi
Africa
PRC
Oth Asia
308
FSU
EUR
159
Unshipped Corn Sales by Destination
Week:
18
800
Source: USDA Export Sales
700
90
600
171
230
M bu
500
199
61
400
100
36
50
17
44
62
4
131
120
59
36
115
85
235
164
7
149
77
300
200
70
49
20
58
72
23
31
56
15
121
134
187
31
357
223
170
8
104
196
134
23
13
160
193
3
130
0
UNK
W Hemi
Africa
PRC
Oth Asia
FSU
241
74
87
0
71
3
168
EUR
136
Corn Demand:
1/14/2015
CORN
USDA2
USDA2
Feed
2014/15
USDA Jan
2015/16
Planted Acres (myn a)
Harvested Acres
Abandonment
Yield
Beginning Stocks
Production
Imports
Total Supply & Impts
Feed/Residual
Food, Seed, Industrial
Ethanol for Fuel
Domestic Use, Total
Exports
Total Use
2012/13
97.3
87.4
-10.2%
123.1
989
10,755
160
11,904
4,315
6,038
4,641
10,353
730
11,083
2013/14
95.4
87.5
-8.3%
158.1
821
13,829
36
14,686
5,036
6,501
5,134
11,537
1,917
13,454
2014/15
90.6
83.1
-8.3%
171.0
1,232
14,216
25
15,472
5,275
6,570
5,175
11,845
1,750
13,595
Poor
90.6
83.1
-8.3%
171.0
1,232
14,216
25
15,473
5,228
6,544
5,114
11,772
1,500
13,272
Trend
90.6
83.1
-8.3%
171.0
1,232
14,216
25
15,473
5,278
6,618
5,214
11,896
1,725
13,622
High
90.6
83.1
-8.3%
171.0
1,232
14,216
25
15,473
5,328
6,744
5,314
12,072
1,750
13,822
Trend
88.5
81.3
-8.1%
167.2
1,851
13,593
30
15,475
5,336
6,565
5,175
11,901
1,800
13,701
Ending Stocks
U.S. Stocks/Use Ratio
821
7.4%
1,232
9.2%
1,877
13.8%
2,201
16.6%
1,851
13.6%
1,651
11.9%
1,774
12.9%
Expected CZ Range
Expected Avg Farm PriceRange
NA
$6.89
2 USDA Jan
NA
$4.46
$3.25-$5.75
$3.35-$3.95
$3.26
$3.25-$5.75 $3.25-$5.75 $3.25-$5.75
$3.46
$3.66
$3.25
Corn Demand:
1/14/2015
CORN
USDA2
USDA2
Ethanol
2014/15
USDA Jan
2015/16
Planted Acres (myn a)
Harvested Acres
Abandonment
Yield
Beginning Stocks
Production
Imports
Total Supply & Impts
Feed/Residual
Food, Seed, Industrial
Ethanol for Fuel
Domestic Use, Total
Exports
Total Use
2012/13
97.3
87.4
-10.2%
123.1
989
10,755
160
11,904
4,315
6,038
4,641
10,353
730
11,083
2013/14
95.4
87.5
-8.3%
158.1
821
13,829
36
14,686
5,036
6,501
5,134
11,537
1,917
13,454
2014/15
90.6
83.1
-8.3%
171.0
1,232
14,216
25
15,472
5,275
6,570
5,175
11,845
1,750
13,595
Poor
90.6
83.1
-8.3%
171.0
1,232
14,216
25
15,473
5,228
6,544
5,114
11,772
1,500
13,272
Trend
90.6
83.1
-8.3%
171.0
1,232
14,216
25
15,473
5,278
6,618
5,214
11,896
1,725
13,622
High
90.6
83.1
-8.3%
171.0
1,232
14,216
25
15,473
5,328
6,744
5,314
12,072
1,750
13,822
Trend
88.5
81.3
-8.1%
167.2
1,851
13,593
30
15,475
5,336
6,565
5,175
11,901
1,800
13,701
Ending Stocks
U.S. Stocks/Use Ratio
821
7.4%
1,232
9.2%
1,877
13.8%
2,201
16.6%
1,851
13.6%
1,651
11.9%
1,774
12.9%
Expected CZ Range
Expected Avg Farm PriceRange
NA
$6.89
2 USDA Jan
NA
$4.46
$3.25-$5.75
$3.35-$3.95
$3.26
$3.25-$5.75 $3.25-$5.75 $3.25-$5.75
$3.46
$3.66
$3.25
Corn Demand: Ethanol
Year-to-date pace
Running at 5,290
6000
USDA forecast looks low, exports?
5,019 5,000
MBU
5000
5,175
2013
2014
4,641
4,591
4000
5,134
3,709
3,049
3000
2,119
2000
1000
996
1,168
1,323
1,603
707
0
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
Ethanol Margins…
Corn Balance Sheet: Supply & Demand
What does 2015 look like?
2012/13:
Carryout: 821 mbu
Avg Farm Price: $6.89
2013/14:
Carryout: 1,232 mbu
Avg Farm Price: $4.46
SOYBEANS
World & U.S. Soybeans Stocks to Use Ratio
35%
30%
25%
32%
Could see an almost unprecedented build
in the world stocks “cushion” this year?
US
from 3% to 11%
World from 24% to 32% (prev hi 28%)
20%
15%
11%
10%
5%
0%
Source: USDA
World Stocks to Use
US Stocks to Use
U.S. Soybean Yields
8.0
47.8
Certainly an above trend yield year!
6.0
45.0
43.142.9
42.2
41.7
41.4
40.0
bpa
38.1
37.6
44.0
4.0
42.0
40.0
39.7
39.6
38.938.9
37.6
44.0
43.5
2.0
38.0
0.0
36.6
35.3
35.0
34.134.2
34.1
33.9
33.3
33.9
-2.0
32.6
32.3
31.5
-4.0
30.1
30.0
28.1
26.5
27.0
Vs Trend
26.2
Actual
-6.0
Trend
2014
2012
2010
2008
2006
2004
2002
2000
1998
1996
1994
1992
1990
1988
1986
1984
1982
-8.0
1980
25.0
versus trend, bpa
50.0
60
World Soybean Production, Use and US Price
50
30
$14.00
Production to outpace use for 3rd straight year
$12.00
“Bearish price statement”
$10.00
$/BU (US)
40
$16.00
MMT
20
$8.00
10
$6.00
0
-10
$4.00
-20
$2.00
Can S. American ship it?
-30
$0.00
Prod Chge
Use Chge
Avg Frm Prx
MBU
Record Soybean Production
Projected in South America for 14/15
6,500
6,000
5,500
5,000
4,500
4,000
3,500
3,000
2,500
2,000
1,500
1,000
500
-
USDA: South American Soybean Production
53%
48% 48%
41%
34%
28%
30% 31%
30%
51% 51%
49%
45%
48%
50%
42%
37%
40%
32% 32%
30%
20%
10%
0%
Argentina
Source: USDA
36% 35%
46%
47%
60%
54% 53%
53%
Uruguay
Paraguay
Brazil
Bolivia
USA
SAM Share of World
Protein Consumption in China has Expanded Rapidly
China Meal Consumption
80,000
Meal, Rapeseed
Meal, Soybean
70,000
1000 MT
60,000
50,000
40,000
30,000
20,000
10,000
0
Source: USDA
China demand drives soybean market!!
Meal, Sunflowerseed
Soybean Demand: Exports
1/14/2015
SOYBEAN
Planted Acres
Harvested Acres
Abandonment
Yield
Beginning Stocks
Production
Imports
Total Supply & Impts
Seed/Residual
Crush
Domestic Use, Total
Exports
Total Use
SAM Production MMT (5)
U.S. Ending Stocks
World Ending Stocks MMT
U.S. Stocks/Use Ratio
Expected SX Range
Expected Avg Farm Price/Range
USDA2
2012/13
77.2
76.1
-1.4%
40.0
169
3,042
41
3,252
105
1,689
1,794
1,317
3,111
146
141
57
4.5%
NA
$14.40
2 USDA Jan
Yield raised 0.3 bpa
Exports raised 10mbu
Carryout unchanged
Source: : USDA, Advance Trading, Inc.
USDA2
USDA Jan
2014/15
2015/16
2013/14
2014/15
Poor
Trend
High
Trend
76.8
83.7
83.7
83.7
83.7
89.0
76.3
83.1
83.1
83.1
83.1
88.1
-0.7%
-0.7%
-0.7%
-0.7%
-0.7%
-1.0%
44.0
47.8
47.8
47.8
47.8
45.4
141
92
92
92
92
370
3,358
3,969
3,972
3,972
3,973
3,998
72
15
15
15
15
15
3,570
4,076
4,079
4,079
4,080
4,383
97
116
110
120
130
125
1,734
1,780
1,760
1,785
1,795
1,825
1,831
1,896
1,870
1,905
1,925
1,950
1,647
1,770
1,770
1,805
1,840
1,800
3,478
3,666
3,640
3,710
3,765
3,750
155
165
165
165
165
165
92
410
440
370
316
633
67
91
91
91
91
90
2.7%
11.2%
12.1%
10.0%
8.4%
16.9%
$8.25-12.75
$8.25-$12.75 $8.25-$12.75 $9.20-$12.75
NA
$13.00
$9.45-$10.95
$8.81
$9.31
$9.81
$8.77
YTD Soybean Exports Shipped by Destination
WEEK:
Source: USDA Export Sales
18
1,200
70% of shipments to China so far
MBU
1,000
800
764
600
650
474
400
200
102
70
69
77
212
249
64
70
74
55
69
57
122
96
110
02
03
04
0
Total Known/Unknown
Source: USDA Export Sales
211
178
220
320
408
55
58
55
43
63
78
64
83
54
62
61
72
45
43
53
64
61
78
52
58
57
86
48
48
05
06
07
08
09
10
E Europe
Far East
545
543
Oth Asia/Africa
51
45
35
15
11
W Hemi
71
54
92
50
73
50
92
41
78
108
12
13
14-F
Mainland China
95
45
Soybean Demand: Crush
1/14/2015
SOYBEAN
Planted Acres
Harvested Acres
Abandonment
Yield
Beginning Stocks
Production
Imports
Total Supply & Impts
Seed/Residual
Crush
Domestic Use, Total
Exports
Total Use
SAM Production MMT (5)
U.S. Ending Stocks
World Ending Stocks MMT
U.S. Stocks/Use Ratio
Expected SX Range
Expected Avg Farm Price/Range
USDA2
2012/13
77.2
76.1
-1.4%
40.0
169
3,042
41
3,252
105
1,689
1,794
1,317
3,111
146
141
57
4.5%
NA
$14.40
2 USDA Jan
USDA2
USDA Jan
2014/15
2015/16
2013/14
2014/15
Poor
Trend
High
Trend
76.8
83.7
83.7
83.7
83.7
89.0
76.3
83.1
83.1
83.1
83.1
88.1
-0.7%
-0.7%
-0.7%
-0.7%
-0.7%
-1.0%
44.0
47.8
47.8
47.8
47.8
45.4
141
92
92
92
92
370
3,358
3,969
3,972
3,972
3,973
3,998
72
15
15
15
15
15
3,570
4,076
4,079
4,079
4,080
4,383
97
116
110
120
130
125
1,734
1,780
1,760
1,785
1,795
1,825
1,831
1,896
1,870
1,905
1,925
1,950
1,647
1,770
1,770
1,805
1,840
1,800
3,478
3,666
3,640
3,710
3,765
3,750
155
165
165
165
165
165
92
410
440
370
316
633
67
91
91
91
91
90
2.7%
11.2%
12.1%
10.0%
8.4%
16.9%
$8.25-12.75
$8.25-$12.75 $8.25-$12.75 $9.20-$12.75
NA
$13.00
$9.45-$10.95
$8.81
$9.31
$9.81
$8.77
Soybean Demand: Crush
Both SBM exports and domestic
use increasing crush
1850
1808
1800
MBU
1780
1752
1739
1750
1700
1803
1700
1703
1696
1662
1650
1734
1689
1648
1615
1600
1530
1550
1500
1450
1400
1350
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
Soybean Balance Sheet: Supply & Demand
Source: : USDA, Advance Trading, Inc.
Soybean Balance Sheet: Supply & Demand
Source: : USDA, Advance Trading, Inc.
WHEAT
World & U.S. Wheat Stocks to Use Ratio
World and US Wheat Stocks to Use Ratio
60%
48%
50%
37%
36%
25%
20%
21%
28%
26%
23%
24%
20%
20%
36%
33%
31%
30%
30%
29%
29%
25%
24%
24%
27%
23%
24%
22%
19%
19%
21%
25%
22%
18%
16%
33%
30%
25%
21%
23%
21%
24%
21%
22%
2014
26%
27%
31%
29%
36%
2013
30%
40%
2012
40%
39%
17%
13%
10%
World Stocks to Use
Source: USDA
US Stocks to Use
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
0%
U.S. SRW Wheat Planted Acreage Set to
Decline Further in 2015
Source: USDA
U.S. SRW Planted Acreage: 1985-2015
16
14
10
8
6
4
2
est 2015
2013
2011
2009
2007
2005
2003
2001
1999
1997
1995
1993
1991
1989
1987
0
1985
Million acres
12
U.S. HRW Planted Acreage Forecast at a
6-Year High in 2015
Source: USDA
U.S. HRW Planted Acreage: 1985-2015
45
35
30
25
est 2015
2013
2011
2009
2007
2005
2003
2001
1999
1997
1995
1993
1991
1989
1987
20
1985
Million acres
40
Soft Red Wheat Balance Sheet: Supply & Demand
All Wheat Balance Sheet: Supply & Demand
Marketing
Net Farm Income and Net Cash Income
$150
$140
$130
$120
Billion $
$110
$100
$90
$80
$70
$60
$50
$40
$30
Source: ERS - Farm Income and Wealth Statistics
Net Farm
Net Cash
Corn Price Volatility
CORN
Source: CME Group
Corn Volatility
High
2015*
2014
2013
2012
2011
2010
$9.00
$8.00
$7.00
$6.00
$5.00
$4.00
$3.00
$2.00
$1.00
$0.00
2009
$0.20
$2.01
$3.39
$2.93
$2.30
$3.05
$1.50
$4.73
$1.48
$1.88
$0.77
$1.44
$0.57
$0.94
$0.46
2008
$3.90
$3.18
$4.10
$5.51
$5.70
$3.25
$3.00
$2.90
$3.09
$2.04
$1.86
$1.91
$2.05
$1.91
$1.84
2007
$4.10
$5.20
$7.49
$8.44
$8.00
$6.30
$4.50
$7.63
$4.57
$3.92
$2.63
$3.35
$2.62
$2.85
$2.30
2006
2015*
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2005
Change
2004
Low
2003
High
2002
Year
Low
Fourteen Year Average
Volatility for Corn =
2010 - 2014 Average
Volatility for Corn =
$1.96
$2.74
Soybean Price Volatility
SOYBEANS
Source: CME Group
$20.00
$15.00
$10.00
$5.00
High
2015*
2014
2013
2012
2011
2010
2009
$0.00
2008
$0.57
$6.33
$3.75
$6.45
$3.62
$4.94
$4.47
$8.83
$5.83
$1.66
$2.53
$5.63
$2.70
$2.09
$1.18
2007
$10.02
$9.04
$12.55
$11.50
$10.94
$9.00
$8.44
$7.77
$6.47
$5.27
$4.99
$5.01
$5.32
$4.16
$4.20
2006
$10.59
$15.37
$16.30
$17.95
$14.56
$13.94
$12.91
$16.60
$12.30
$6.93
$7.52
$10.64
$8.02
$6.25
$5.38
Soybean Volatility
2005
2015*
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
Change
2004
Low
2003
High
2002
Year
Low
Fourteen Year Average
Volatility for Soybeans =
2010 - 2014 Average
Volatility for Soybeans =
$4.29
$5.02
Wheat Price Volatility
Source: CME Group
Wheat Volatility
$14.00
$12.00
$10.00
$8.00
$6.00
$4.00
$2.00
High
2015*
2014
2013
2012
2011
2010
2009
2008
2007
2006
$0.00
2005
Change
$0.42
$2.69
$2.01
$3.58
$3.20
$3.78
$2.47
$8.45
$5.97
$2.36
$0.82
$1.42
$1.36
$1.79
$0.52
2004
Low
$5.62
$4.66
$5.99
$5.90
$5.72
$4.26
$4.29
$4.55
$4.12
$3.21
$2.87
$2.83
$2.73
$2.56
$2.43
2003
High
$6.04
$7.35
$8.00
$9.47
$8.92
$8.04
$6.76
$13.00
$10.09
$5.57
$3.69
$4.24
$4.09
$4.34
$2.95
2002
Year
2015*
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
Low
Fourteen Year Average
Volatility for Wheat =
2010 - 2014 Average
Volatility for Wheat =
$2.88
$2.39
The following comes from an episode of Louis CK’s TV show, Louie, as part of one of the short standup routines he intermittently mixes into the show. Reminds us of how we manage risk sometimes…
“You try to keep your kids safe. Like, if my kids get in a car
with me, I make them buckle up. I make a big deal out of it;
I’m not even starting this car until you buckle your seat
belts.
But if we get in a taxi, I’m like, ‘Just…it’s fine. Taxis are
magic, nobody dies. Just get in, just go.”
2009: Argentina crop
experiences major drought
Back to Basics…
The Economist
January 3rd, 2015
“In The Next 40 Years,
Humans Will Need To Produce
More Food Than In The Last
10,000 Years Combined.”
Back to Basics…
Things can and will change…
•
•
•
•
•
•
And quickly…
GMO
Ethanol regulations
Livestock regulations
World production
World Politics and Policy
Outside markets or invest money
Back to Basics…
December 23, 2014
“Half of All Children Will Be Autistic by 2025”.
Stephanie Seneff, PhD
Senior Research Scientist at MIT
At a conference last Thursday, in a special panel discussion about
GMOs, she took the audience by surprise when she declared, “At today’s
rate, by 2025, one in two children will be autistic.” She noted that
the side effects of autism closely mimic those of glyphosate toxicity,
and presented data showing a remarkably consistent correlation between
the use of Roundup on crops (and the creation of Roundup-ready GMO
crop seeds) with rising rates of autism. Children with autism have
biomarkers indicative of excessive glyphosate, including zinc and iron
deficiency, low serum sulfate, seizures, and mitochondrial disorder.
Livestock Production, Risks vs Rewards
Wisconsin Supreme Court Holds Manure is a Pollutant Under
Farm Insurance Policy
December 31, 2014
On December 30, 2014, the Wisconsin Supreme Court reversed a court of appeals decision in
Wilson Mutual Insurance Co. v. ---, 2014 WI 136 (Wis. 2014), holding that manure that
contaminates a well is a “pollutant,” and is therefore not covered under a farm’s general
liability insurance policy. This is a precedent setting decision, and it will affect whether
farms in Wisconsin that allegedly cause the contamination of wells with manure will be able to
rely on insurance to pay for damages. Given the supreme court’s holding, farms relying on
standard general liability policies may not have insurance coverage for personal and property
damage claims arising from well contamination caused by manure.
In Wilson Mutual Ins. Co., the ---, dairy farmers in Washington County, fertilized their fields
with manure from their dairy cows according to a nutrient management plan prepared by an
agronomist and approved by the county conservation office. A few months later, the Wisconsin
Department of Natural Resources alleged that the farm’s manure had polluted an aquifer and
neighboring wells. Thereafter, the neighboring landowners sought compensation from the Falks
for damages arising out of the well contamination.
Back to Basics…
• Any strategy/risk management plan should be
simple enough that it can be explained and
understood in a typical conversation.
• Expect and Welcome Price Volatility!
• Things can and will change…
at the energy markets!
Just look again
Example of how quickly things can change……
Example of how quickly things can change……
Where is (fill in “blank”) in the “cycle”?
Here?
Or here?
January 27, 2015?
Back to Basics…
Why manage price if below break-even?
Good question!
•
As long as you plan on planting a crop irrespective
of break-even, you have downside price risk to loan
rate on unprotected production.
•
If prices go higher (price risk doesn’t occur),
make certain your strategy performs well and is
flexible.
Back to Basics…
Marketing Opportunities
•
•
•
•
•
•
Do nothing
Forward Cash Sales
Futures
Options
Structured products
Let someone else do it
Back to Basics…
Options Fit Farmers For Price Risk
Management
Those who say options do not work either have
limited experience with them or have not managed
them properly.
Back to Basics…
Do you want to risk a premium (fixed
amount) or risk hard earned equity?
Options need a second look if you
aren’t using them or have a negative
impression of them.
Back to Basics…
The emotional or
psychological part
of marketing is real.
Options control
Emotions.
Back to Basics…
• You have grain that has zero production risk
(old crop that is already harvested). Why have
you not sold it? Optimistic?
• Remember the concern or “heavy feeling” in late
September/early Oct when we were $3.00 futures?
• Cost of storage is something. AND you still
have downside risk… Exchange the cost with a
long call.
Back to Basics…
Unpriced Old crop grain on farm or in storage…
Risks/costs:
 Storage costs
 Quality
 Lower prices
Opportunities:
 Higher prices
How do you get
rid of these
cost/risks?
Back to Basics…
Unpriced Old crop grain on farm or in storage…
Risks/costs:
 Storage costs
 Quality
 Lower prices
Opportunities:
 Higher prices
Sell Cash!
BUT, also loose
upside
opportunity.
Back to Basics…
Do NOT want to trade one risk for
another on a substantial percentage of
crop.
i.e. Downside risk for upside risk
That becomes price prediction.
Back to Basics…
Unpriced Old crop grain on farm or in storage…
Risks/costs:
 Storage costs
 Quality
 Lower prices
Opportunities:
 Higher prices
Sell Cash!
How can I retain
upside price
opportunities?
Using a long call.
Back to Basics…
• Many are looking at new crop – hard to manage
the new crop until the old crop is managed.
• New crop soybeans are in the black – should
protect against lower prices
• The market didn’t care when growers were making
$400/per acre and it doesn’t care if you are
losing $100-200.
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This material is a solicitation to enter into a derivatives
transaction. The information and data contained herein have been
obtained from sources believed to be reliable but Advance Trading Inc.
("Advance") does not warrant their accuracy or completeness.
Recommendations and opinions contained herein reflect the judgment of
Advance as of the date hereof, are subject to change, and are based on
certain assumptions, only some of which are noted herein. Different
assumptions could yield substantially different results. You are
cautioned that there is no universally accepted method for analyzing
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is no guarantee as to the liquidity of the instruments involved in our
analysis. Advance, its affiliates, and its and their officers,
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legal advice to clients. Clients therefore should consult their own
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