Marketing Is The Name Of The Game For 2014 Crop

Marketing Is The Name Of The Game For 2014 Crop

Iowa Commodity Challenge lets you learn how to use marketing tools without risking real money.

Most farmers in Iowa are storing the majority of the corn and soybeans they're harvesting this fall. The U.S. has a record corn crop, as does Iowa. The U.S. has a record soybean crop; Iowa's is near-record. Storage space is tight, prices are low. "Those are good reasons to store and use a marketing plan to capture higher prices later," says Matt Erpelding, who farms near Algona in northern Iowa.

STORING IT: Like most farmers in Iowa, Matt Erpelding of Kossuth County is storing the corn he's harvesting this fall. He sold his soybeans ahead of harvest. Marketing this year's corn and beans will be even more important than usual as low prices leave little or no profit margin.

He's storing all his 2014 corn. He sold his soybeans ahead of harvest. With enough on-farm bin space to store his corn without having to haul it to an elevator and pay commercial storage, he has marketing flexibility. "I've forward contracted some of the 2014 crop," Erpelding explains. "I can take some of the corn to town as the contract delivery dates call for it." He was already delivering corn on contract in late October.

Marketing is more important as profit margins have disappeared
Across Iowa this fall grain dryers, fans and aeration systems are getting a workout. Harvested grain is a little wetter than in recent years. Much of the corn harvested the last week of October and first week of November averaged 18% to 20% moisture, about 2 points higher than normal.

Marketing this year's crop will be more important than usual with profit margins for corn and soybeans so tight, or non-existent. "The last few years have provided instant gratification with very good prices and margins during harvest or not long after harvest," says Chad Hart, Iowa State University Extension grain marketing economist. "Now, it is back to normal and the market will reward you for storing."

Playing the marketing game: The Iowa Commodity Challenge
To learn how to use various grain marketing tools, farmers are encouraged to take the Iowa Commodity Challenge. It's an online market simulation game providing participants with knowledge to improve their strategies for selling cash corn and soybeans, as well as learning how to use futures and ag options in marketing.

~~~PAGE_BREAK_HERE~~~

ISU Extension and Iowa Farm Bureau developed the curriculum to accompany this unique educational tool several years ago. This fall they've updated it and are making it available again. "The Iowa Commodity Challenge gives participants a chance to sharpen their crop marketing skills and develop strategies," says Ed Kordick, Farm Bureau's commodity services manager. "In these times of tight margins, understanding how to use these tools to help you make better marketing decisions is very valuable."

Game lets you learn about marketing without risking real money
The new simulation includes bushels that can be sold at harvest, stored for later sale (with ownership costs), forward contracted or priced using futures and options. It offers a great opportunity to compare strategies and learn about marketing alternatives without having to put "real money" on the line. The Iowa Commodity Challenge 2014-15 runs from now until March 11. Members can access the instructions and password for this simulation by going to www.iowafarmbureau.com and looking for the banner. Those without a Farm Bureau membership can join to access this educational simulation.

This simulation will be accompanied by emails periodically to encourage experimentation and make marketing tool observations to enhance the learning process. "You can learn how these tools work with real markets so you can more effectively manage risk with real commodities," says Kordick. "You can examine the market carrying charge, basis moves and other market factors in your simulation." You have to sign up before February, but the sooner you sign up the better for more learning opportunity.

Iowa Commodity Challenge 2014-15 information
In this simulation, you begin with 75,000 bushels of corn and 25,000 bushels of soybeans from the 2014 crop that you must market by March 11, 2015. You can use futures, options, cash forward contracts and cash transactions to market your crops. Cash transactions are based on the market in Bondurant (just north of Des Moines).

The marketing choices you make in the game are entirely up to you. The game allows you to experiment with marketing tools under real-world conditions. The prices in the game are prices currently available in the market. And just like in real life, stored bushels will be assessed a weekly storage cost.

~~~PAGE_BREAK_HERE~~~

An on-going updated summary of market prices, charts, basis and option premiums used for the simulation are available on the ISU Ag Decision Maker website, developed to support your learning. The webpage includes a 63-page workbook and recorded educational webcasts.

What's your grain marketing strategy? "The record large 2014 crops and low prices make grain marketing more important than it has been the past few years, when prices were significantly higher than they are now," sums up ISU Extension farm management specialist Steve Johnson. "Most farmers are storing their 2014 crop corn and soybeans, to wait for prices to rebound. To help farmers learn more about crop marketing, we helped develop this online simulation, called the Iowa Commodity Challenge. We updated it for the 2014 crop. It's a game you can play to learn more about grain marketing tools and to improve your crop marketing skills and profitability."

For farm management information and analysis visit ISU's Ag Decision Maker site at www.extension.iastate.edu/agdm; ISU farm management specialist Steve Johnson's site is at www.extension.iastate.edu/polk/farm-management.

TAGS: Extension
Hide comments

Comments

  • Allowed HTML tags: <em> <strong> <blockquote> <br> <p>

Plain text

  • No HTML tags allowed.
  • Web page addresses and e-mail addresses turn into links automatically.
  • Lines and paragraphs break automatically.
Publish