Grain Marketing 101. Shannon Dill Extension Educator, Ag & Natural Resources University of Maryland Cooperative Extension Talbot County

Transcription

1 Grain Marketing 101 Shannon Dill Extension Educator, Ag & Natural Resources University of Maryland Cooperative Extension Talbot County Jenny Rhodes Extension Educator, Ag & Natural Resources University of Maryland Cooperative Extension Queen Anne s County

2 Objectives Marketing Terminology Where to get Grain Marketing Information Making Trading Decisions

3 Marketing terminology Futures Price The price of a particular futures contract at a specified point in time. Determined by open competition between buyers and sellers This is the national price set for grain This is the price that all grain is quoted on nationally Most futures contracts do not result in physical delivery.

4 Marketing terminology Cash Price This is the local price quoted for grain by individual buyers such as a grain elevator Determined by the local need of a commodity Cash/forward contracts results in delivery

5 Marketing Terminology Basis is the difference between a cash price and a futures price of a particular commodity on a given futures exchange. It is calculated as: Futures price - Cash price = Basis Basis can be positive or negative Determined by the supply and demand locally

6 Marketing Contracts Most Common Used by farmers and requires delivery Forward Contract is a contract for the cash sale of grain at a specified price for future delivery. Hedge to Arrive Is a contract for the cash sale of grain which locks in the futures price at the date of contracting, the basis can be locked in later. Basis Contract is an agreement between a producer and grain elevator (or feedlot) that specifies the cash price upon future delivery as a fixed amount in relation to the futures price (above or below), thus fixing the basis

7 Marketing Contracts Advanced Anyone can trade requires broker, margins and 5,000 bushel contracts Used by anyone Futures Contract is a transferrable contract traded on a futures exchange Most futures contracts do not result in physical delivery. An offsetting transaction usually occurs prior to delivery and any price differences are settled in cash. Options Put or Call Contracts, trading tools for creating a price floor or upside potential.

8 Grain Prices and Information Web resources: Chicago Board of Trade now the CME Group Ag Web Lots of other commentary and local elevators Popular press and market experts

9 Marketing terminology Bear is a person who expects lower prices. Bearish Market is a market in which prices are declining. Bull is a person who expects higher prices. Bullish Market is a market in which prices are increasing.

10 Marketing terminology Futures month The month at which the future trade Corn Harvest Dec Store - JFM Soybeans Harvest - Nov Store - JFM Wheat Harvest - July

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15 Crop Insurance Update 2016 SAMANTHA STEELE

16 Things To Consider in 2016 Enterprise Units By Practice Trend Adjustment (TA) APH Yield Exclusion (YE) Beginning Farmers & Ranchers Benefits (BFR) Whole Farm Revenue Protection (WFRP) Strategies For This Year WOMEN IN AG CONFERENCE 2016

17 Enterprise Units By Practice Insuring Irrigated/ Non-Irrigated at different levels Resulting in better risk management & premium discounts Prevents the offset of a loss from high production on IRR acres Works great for heavily irrigated farms TO QUALIFY Must maintain separate records for IRR/NIRR (Visible break/pattern when planting or use of precision technology) Must be planted on two Farm Serial Numbers (FSN) & at least 20% or 20 acres on the FSN s of the total planted acres WOMEN IN AG CONFERENCE 2016

18 Trend Adjustment (TA) Reflects increases in yield over time in the county Designed to improve APH databases that could be up to 20 years old TA based on the county's historical yield trend Provided by RMA s actuarial documents WOMEN IN AG CONFERENCE 2016

19 APH Yield Exclusion (YE) Excludes actual yields from your APH Years determined by RMA Crop years where the simple average is below 50 percent Years differ from crop to crop Producers have the option to not exclude a yield WOMEN IN AG CONFERENCE 2016

20 Beginning Farmers & Rancher Benefits (BFR) Supports producers just beginning to farm Must have not actively been engaged in a farm for more than five years (owner-operator, landlord, tenant, share cropper) BENEFITS Exempt from administrative fees Additional 10% points in premium subsidy Increase in substituted yield Use of production history from farm producer was previously involved WOMEN IN AG CONFERENCE 2016

21 **New** Whole Farm Revenue Protection (WFRP) First policy available in every county in the U.S. Combination of Adjusted Gross Revenue (AGR) & AGR-Lite With improvements from a review and surveys Provides whole-farm risk management under one policy Available up to $8.5 Million for all commodities produced on the farm Diversified, specialty, and organic commodities (crops/livestock) all covered Coverage levels 50-85% 3 commodities required for 80-85% coverage The more diversified the higher subsidy WOMEN IN AG CONFERENCE 2016

22 What's Covered? Covers loss of approved revenue from all commodities on the farm Loss based solely on overall revenue Includes animals, animal products, commodity purchases fro resale (up to 50% of total) Excludes timber, forest products, animals for sport, show or pets Replant costs covered (with approval) Historic revenue adjusted to reflect a farm expansion Producers can still buy other MPCI policies Claims will be counted at earned income under WFRP WOMEN IN AG CONFERENCE 2016

23 The Basics of WFRP Well suited for: Highly diverse farms Farms with specialty commodities Insurance Period: Producers tax year Based off your last five years of farm tax forms Several Farm Operation Reports WFRP version of acreage reports Claims are not paid until following spring WOMEN IN AG CONFERENCE 2016

24 Using Crop Insurance to Manage Your Risk in 2016 Opportunities to profit in 2016 will be scarce leaving little room for error Makes Crop Insurance that more important Develop a strategy for your specific needs Lock in a high price Protect your pre-harvest marketing plan Satisfy your loan requirements Cover your input costs Peace of Mind WOMEN IN AG CONFERENCE 2016

25 Upcoming Dates to Remember February 15 th Sales Closing for Green Peas March 15 th Sales Closing for Spring Crops Corn, Soybeans, Grain Sorghum, Lima Beans, Snap Beans, Sweet Corn, Tomatoes, Cucumbers, Whole Farm Revenue Protection March 31 st Green Pea Production Reports Due April 15 th Spring Crop Production Reports Due Corn, Soybeans, Grain Sorghum, Lima Beans, Snap Beans, Sweet Corn, Tomatoes, Cucumbers, Whole Farm Revenue Protection WOMEN IN AG CONFERENCE 2016

26 Talk to your agent to decide the best risk management plan for your operation. Samantha Steele WOMEN IN AG CONFERENCE 2016

27 Marketing tools Using Crop Insurance This allows you to contract with confidence Crop Budgets Need to know cost of production Need to know break-even price you must receive

28 Crop Budgets

29 Marketing Plan Winning the Game Center for Farm Financial Management Set a minimum price Set decision dates to make pricing decisions

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34 Thank You! SHANNON DILL JENNY RHODES