MARKETING CHALLENGES IN A CHALLENGING YEAR Paul Stoddard Senior - - PowerPoint PPT Presentation

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MARKETING CHALLENGES IN A CHALLENGING YEAR Paul Stoddard Senior - - PowerPoint PPT Presentation

Oct 21, 2023 29 likes •401 views

MARKETING CHALLENGES IN A CHALLENGING YEAR Paul Stoddard Senior Lecturer Department of Agricultural & Consumer Economics May you live in interesting times Ive never seen anything like this year 80 83 88

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MARKETING CHALLENGES IN A CHALLENGING YEAR

Paul Stoddard Senior Lecturer Department of Agricultural & Consumer Economics

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“May you live in interesting times…”

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“I’ve never seen anything like this year…”

‘80 ‘83 ‘88 ‘12

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A black swan?

All houses? “Let’s discuss some potential black swans…” Positive or negative…

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The good news One per generation?

A Challenging Year

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Source: Irwin, S. "IFES 2016: Long-Term Weather and Prospects for a Recovery in Corn Prices." 11, 2017.

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We’re coming off a series of fantastic crop years!

Some perspective…

https://www.dtnpf.com/agriculture/web/ag/blogs/fundamentally-speaking/ blog-post/2018/12/19/looking-ahead-2019-corn-yields

Big increase in APHs!

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A “realization” market?

What if?

8/21/12: $8.39 9/25/12: $7.40

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A short crop has a long tail

Source: futurestradingcharts.com

1/1/08 1/1/09 1/1/10

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Price rations demand

Eventually… ALWAYS…

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Typically 1) the drop is almost completely unexpected 2) comes when news is most bullish 3) goes farther/faster than expected 4) so we don’t realize it was the peak until much later 5) so we call it a pullback in a bull market

A short crop has a long tail

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Implications for next year?

A “Realization Rally”?

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Source: futurestradingcharts.com 9/14/06

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Sept 1, 2006 Cash: $2.20 & $5.19 SB = Corn x 2.36 Dec 1, 2006 Fall 2007 bids: $3.40 & $7.04 SB = Corn x 2.07 Big Acreage Shift! Dec 1, 2007 Fall 2008 bids: $3.96 & $9.71 SB = Corn x 2.45 Big Acreage Shift!

Acreage Shift?

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Should I sell more than one year’s crop?

If we have a realization rally this fall…

Can you lock in more than

  • ne year’s expenses?
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If…then If you make a 2020 planting decision based a Fall ’20 bid…

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Spreads won’t keep up 2019’s impact on 2020 will be muted (demand will respond) Beyond 2020, traders assume average production

Sell more than one crop year?

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There will be a few spectacular marketing failures

If you can’t tell me…

Long + Long = Texas Hedge

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Option strategies? Why Nov 22 is important What will we know by then? Don’t forget to subtract 1) 2)

Remember…

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Option strategies Apple to apples?

Remember…

Prices 7/30/19: Sell fall corn at $4.13/bu Replace with a.t.m. Dec call – Buy Dec 420 call at 24 cents; expires Nov 22 Net = 413-24 = 389 in your pocket; need +24 to B.E. Prices 7/30/19: Sell fall corn at $4.13/bu Replace with a.t.m. July 2020 call – Buy July 440 call at 36 cents; expires June 26 Net = 413-36 = 377 in your pocket; need +36 to B.E.

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Option strategies? Drip, drip, drip…

Remember…

Premium + commission Premium + commission Premium + commission

2019 Marketing Year is very young!

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A word about basis…

Remember…

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It’s never been more important

Enterprise units: good and bad news

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If something works well most of the time… If something worked well last year…

Recency Bias

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December Corn Seasonal Trends

(2000-2017 Futures I ndexed)

Source: www.cffm.umn.edu, Usset, October 2017

Slide used by permission of Steve Johnson, Iowa State University 26

But what about counter-seasonal moves?

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Storing too much grain into summer Not selling new crop at first sight of profitable price

Things that normally don’t work, work well in the oddball years

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An interesting year? Even a blind hog finds a few acorns…

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Best Practices for Surviving & Thriving

I ’ll never let you go! 29

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What if?

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What if?

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Look for the management lessons from 2019

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Market Facilitation Program Payment Impact on Central High IL Case Farm Financial Position Source: Gardiner Farm Income and Policy Simulator

How important are the 2019 MFP payments?

Source: Swanson, K. and G. Schnitkey. "MFP Impact on 2019 through 2023 Incomes and Financial Positions." farmdoc daily (9):134,Department of Agricultural and Consumer Economics, University of Illinois at Urbana-Champaign, July 23, 2019

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Best Practices for Surviving & Thriving

  • Make small mistakes; don’t swing for the fence
  • Especially if you’re young and/or in debt
  • Don’t forget the the number one goal is to BE HERE TO

PLAY THE GAME AGAIN NEXT YEAR

  • Every generation of farmers experienced a high impact

event that is unprecedented in their experience

  • My Grandpa’s generation didn’t see the Great

Depression coming

  • My Dad’s generation didn’t see the Eighties coming
  • What is it that your generation doesn’t see coming?
  • What if your generation has more than one?

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Best Practices for Surviving & Thriving

  • But remember also
  • Every generation experiences short

periods of unprecedented prosperity that are entirely unexpected – POSITIVE black swans

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Thank you for your time!

pstoddrd@Illinois.edu

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