A new way to learn how to use grain marketing tools is being introduced to farmers this winter. Called 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 learn how to use futures and ag options in marketing.
Iowa State University Extension and Iowa Farm Bureau developed this unique educational effort, and are making it available. "The Iowa Commodity Challenge gives participants a chance to sharpen their crop marketing skills and develop strategies," says Ed Kordick, commodity services manager for Iowa Farm Bureau. "In these times of very volatile prices and tightening profit margins, understanding how to use these tools to help you make better marketing decisions is very valuable."
Participating farmers have the opportunity to use futures and options with fictitious bushels instead of spending real money and possibly losing it as a learning experience. "This game is online but you're actually buying and selling futures in real time 24/7," points out Steve Johnson, ISU Extension farm management specialist, "and you can buy and sell puts and calls."
By playing this game, you can learn without losing money
To begin, each participant gets 50,000 bushels for corn and 20,000 bushels for soybeans—all fictitious. The grain is stored at the local co-op accruing storage costs and interest at 6 cents per bushel per month. The challenge is to use a variety of marketing tools to get the grain sold by February 29, 2012--when the game ends.
"It gives players a chance to look at commodity markets and how they work over the course of several months," says Johnson. "The game reflects what's going on in the real world so we can try out strategies in a market setting and explore how the tools work."
The online market simulation game is managed by the University of Minnesota. ISU Extension grain economist Chad Hart, along with Johnson and Kordick adapted it to use local prices and marketing situations for Iowa participants. "Basically, we developed a curriculum," says Hart. "It's a 40-page workbook with weekly activities." That includes weekly charts to track basis, for both spot cash delivery and forward contract delivery. Every Wednesday participants track the March futures close for corn and soybeans. The grain has to be sold by February 29. You can sell futures today or buy a 'put' today. This game is in real time.
You can still participate in online version of the game
Participants keep track of their futures or options positions. They must have a user name and password to play the Iowa version of the game. Anyone can go to the www.commoditychallenge.com site maintained by the University of Minnesota and signup and play. "What makes the Iowa game unique is we've created the bushels, the weekly activities and the workbook. We're tracking local cash prices at elevators and making it more realistic," says Johnson.
He adds, "The fun part of participating in this game isn't about winning; it's learning how these marketing tools work. How futures work with cash prices and basis, and how a farmer doesn't have to just sell crops for cash. Or forward contract. You can sell futures. You can buy puts. Or you could sell the cash commodity and buy calls."
To participate in the 2012 Iowa Commodity Challenge, you could have attended the meetings at one of the four grain marketing clubs that ISU Extension works with in central Iowa. Those were held in November at Ogden, Conrad, Nevada and Lynnville where the game was explained, but participants still needed to register online. The clubs will meet again in mid-February to discuss how game participants are getting along in reaching the goal of getting their grain sold by February 29.
You get a workbook to help guide you through the game
What if you didn't attend one of the marketing club meetings in November? Can you still sign up to play? Yes, you can. You can still sign up and participate in this program over the Internet if you are an Iowa Farm Bureau member. For more information, contact Ed Kordick at 515-225-5433 or by email [email protected].
At the November meetings of the marketing clubs ISU Extension farm management specialist Steve Johnson and Farm Bureau's Ed Kordick were available in person to explain the game, to answer questions, and to help participants get started. If you sign up to play now, after the November meetings, you will have to begin playing the game online—without the benefit of "coaches" being present. You will receive the workbook to help you get started and to guide you through as you play the game.
SUMMING UP: This online simulation game allows for the use of real marketing tools, but it does so in a fictitious setting. You have no money on the table so you can try these tools without losing anything. By participating in the Iowa Commodity Challenge game you learn how to use the tools correctly and it can improve your crop marketing skills and profitability.
The game lets you use futures, options & other cash pricing tools in real-time setting. Participants try out various strategies and explore how different marketing tools work.
For farm management information and analysis, go to ISU's Ag Decision Maker site www.extension.iastate.edu/agdm and ISU Extension farm management specialist Steve Johnson's site www.extension.iastate.edu/polk/farmmanagement.htm.