ECON 337:

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ECON 337 Agricultural Marketing

Chad Hart Assistant Professor chart_at_iastate.edu 51
5-294-9911
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Example Transaction for Marketing Report

• Details
• Cash Price
• Basis
• Gross Revenue
• Net Return after Prod. Costs
• Futures/Options Return
• Storage and Opportunity Costs
• Final Net Return

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10,000 Bushels of Soybeans Stored at Home

• Timeline
• Harvested Nov. 1
• Hedged with futures Jan. 10
• Offset hedge and sold Apr. 12
• So the beans were in storage for 5.4 months

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Relevant Prices and Costs

• Cash Prices Nov. 1 11.55
• Apr. 12 13.79
• Basis at Sale -0.62
• Prod. Costs -9.45
• Futures Prices Jan. 10 12.41
• Apr. 12 14.41
• Storage Costs 0.01/month
• Interest Rate 7.5

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Costs of Ownership

• Storage Costs
• 5.4 months 0.01/bu/month 10,000 bu
• 540 or 0.054/bu
• Opportunity Costs
• (5.4/12) 11.55/bu 7.5 10,000 bu
• 3,900 or 0.39/bu
• Total 4,440 or 0.444/bu

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Futures/Options Return

• Sold May 12 Futures on Jan. 10 _at_ 12.41
• Offset by buying May 12 Futures on Apr. 12 _at_
  14.41
• Paid broker 0.01/bu for the service
• Per Bushel Return
• (12.41 - 14.41) - 0.01 -2.01
• Total Return on Hedge -20,100

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Final Tally
Per Bushel Total
Cash Price 13.79 137,900
Production Cost 9.45 94,500
4.34 43,400
Costs of Ownership 0.444 4,440
3.896 38,960
Futures/Options Return 2.01 20,100
Final Net Return 1.886 18,860
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Historical Comparison
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Historical Comparison
Average 0.40/bushel For 2011, Captured
1.89/bushel
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• Class web site
• http//www.econ.iastate.edu/chart/Classes/econ337
  /Spring2012/