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Murphy Brown Grower Market Outlook
2/4/15
Advance TradingBloomington ,IL
2009: Argentina crop experiences major drought
Commodity Correlation Matrix
US Dollar Index
CORN
How big was the 2014 crop?
2009: Argentina crop experiences major drought
How big was the 2014 crop?
1/14/2015 USDA2 USDA2USDA Jan 2014/15 2015/16
CORN 2012/13 2013/14 2014/15 Poor Trend High Trend
Planted Acres (myn a) 97.3 95.4 90.6 90.6 90.6 90.6 88.5 Harvested Acres 87.4 87.5 83.1 83.1 83.1 83.1 81.3 Abandonment -10.2% -8.3% -8.3% -8.3% -8.3% -8.3% -8.1%Yield 123.1 158.1 171.0 171.0 171.0 171.0 167.2Beginning Stocks 989 821 1,232 1,232 1,232 1,232 1,851 Production 10,755 13,829 14,216 14,216 14,216 14,216 13,593 Imports 160 36 25 25 25 25 30 Total Supply & Impts 11,904 14,686 15,472 15,473 15,473 15,473 15,475 Feed/Residual 4,315 5,036 5,275 5,228 5,278 5,328 5,336 Food, Seed, Industrial 6,038 6,501 6,570 6,544 6,618 6,744 6,565
Ethanol for Fuel 4,641 5,134 5,175 5,114 5,214 5,314 5,175 Domestic Use, Total 10,353 11,537 11,845 11,772 11,896 12,072 11,901 Exports 730 1,917 1,750 1,500 1,725 1,750 1,800 Total Use 11,083 13,454 13,595 13,272 13,622 13,822 13,701
Ending Stocks 821 1,232 1,877 2,201 1,851 1,651 1,774 U.S. Stocks/Use Ratio 7.4% 9.2% 13.8% 16.6% 13.6% 11.9% 12.9%
Expected CZ Range NA NA $3.25-$5.75 $3.25-$5.75 $3.25-$5.75 $3.25-$5.75Expected Avg Farm PriceRange $6.89 $4.46 $3.35-$3.95 $3.26 $3.46 $3.66 $3.25
2 USDA Jan
Corn Balance Sheet: Supply & Demand
Report changes:Yield dn 0.3bpaProduction dn 191
90/9
1
91/9
2
92/9
3
93/9
4
94/9
5
95/9
6
96/9
7
97/9
8
98/9
9
99/0
0
00/0
1
01/0
2
02/0
3
03/0
4
04/0
5
05/0
6
06/0
7
07/0
8
08/0
9
09/1
0
10/1
1
11/1
2
12/1
3
13/1
4
14/1
50%
5%
10%
15%
20%
25%
30%
35%
30%28%
32%
25%
28%
25%
30% 29%
33% 32%
29%
24%
20%
16%
19%
15%17%
19%18%
16%18% 18%
19% 20%20%
14%
25%
11%
17%
5%
10%
15%
19%18%
19%
16%
11%9%
20%17%
12%13%
14% 13%
9% 8% 7%9%
14%
World and US Corn - Stocks to Use Ratio
World Stocks to Use US Stocks to Use
Corn Demand: Exports
1/14/2015 USDA2 USDA2USDA Jan 2014/15 2015/16
CORN 2012/13 2013/14 2014/15 Poor Trend High Trend
Planted Acres (myn a) 97.3 95.4 90.6 90.6 90.6 90.6 88.5 Harvested Acres 87.4 87.5 83.1 83.1 83.1 83.1 81.3 Abandonment -10.2% -8.3% -8.3% -8.3% -8.3% -8.3% -8.1%Yield 123.1 158.1 171.0 171.0 171.0 171.0 167.2Beginning Stocks 989 821 1,232 1,232 1,232 1,232 1,851 Production 10,755 13,829 14,216 14,216 14,216 14,216 13,593 Imports 160 36 25 25 25 25 30 Total Supply & Impts 11,904 14,686 15,472 15,473 15,473 15,473 15,475 Feed/Residual 4,315 5,036 5,275 5,228 5,278 5,328 5,336 Food, Seed, Industrial 6,038 6,501 6,570 6,544 6,618 6,744 6,565
Ethanol for Fuel 4,641 5,134 5,175 5,114 5,214 5,314 5,175 Domestic Use, Total 10,353 11,537 11,845 11,772 11,896 12,072 11,901 Exports 730 1,917 1,750 1,500 1,725 1,750 1,800 Total Use 11,083 13,454 13,595 13,272 13,622 13,822 13,701
Ending Stocks 821 1,232 1,877 2,201 1,851 1,651 1,774 U.S. Stocks/Use Ratio 7.4% 9.2% 13.8% 16.6% 13.6% 11.9% 12.9%
Expected CZ Range NA NA $3.25-$5.75 $3.25-$5.75 $3.25-$5.75 $3.25-$5.75Expected Avg Farm PriceRange $6.89 $4.46 $3.35-$3.95 $3.26 $3.46 $3.66 $3.25
2 USDA Jan
20012002
20032004
20052006
20072008
20092010
20112012
20132014
0
100
200
300
400
500
600
700
800
900
1000
312 284 322 333 329 380433
304 317 355259
129 119 159
9352
97 90 7687
131
23 35
5513
0
5
24
164214
231 223 227
309
292
208 208142
191
88
221 308
YTD Corn Exports Shipped by Destination 359mbu total
UNK W Hemi Africa PRC Oth Asia FSU EUR
M b
u
Source: USDA Export Sales Week: 18
01 02 03 04 05 06 07 08 09 10 11 12 1314-F
0
100
200
300
400
500
600
700
800
131 120187
121 134223
357
104160 193
13071
168 136
17
4
36
23 15
31
49
8
1323
3
0
7
3
50
62
59
72 56
149
230
170
196 134164
87
235
2413644
77
5831
61
90
20
70 11585
74
171
199
Unshipped Corn Sales by Destination
UNK W Hemi Africa PRC Oth Asia FSU EUR
M b
u
Week: 18
Source: USDA Export Sales
Corn Demand: Feed
1/14/2015 USDA2 USDA2USDA Jan 2014/15 2015/16
CORN 2012/13 2013/14 2014/15 Poor Trend High Trend
Planted Acres (myn a) 97.3 95.4 90.6 90.6 90.6 90.6 88.5 Harvested Acres 87.4 87.5 83.1 83.1 83.1 83.1 81.3 Abandonment -10.2% -8.3% -8.3% -8.3% -8.3% -8.3% -8.1%Yield 123.1 158.1 171.0 171.0 171.0 171.0 167.2Beginning Stocks 989 821 1,232 1,232 1,232 1,232 1,851 Production 10,755 13,829 14,216 14,216 14,216 14,216 13,593 Imports 160 36 25 25 25 25 30 Total Supply & Impts 11,904 14,686 15,472 15,473 15,473 15,473 15,475 Feed/Residual 4,315 5,036 5,275 5,228 5,278 5,328 5,336 Food, Seed, Industrial 6,038 6,501 6,570 6,544 6,618 6,744 6,565
Ethanol for Fuel 4,641 5,134 5,175 5,114 5,214 5,314 5,175 Domestic Use, Total 10,353 11,537 11,845 11,772 11,896 12,072 11,901 Exports 730 1,917 1,750 1,500 1,725 1,750 1,800 Total Use 11,083 13,454 13,595 13,272 13,622 13,822 13,701
Ending Stocks 821 1,232 1,877 2,201 1,851 1,651 1,774 U.S. Stocks/Use Ratio 7.4% 9.2% 13.8% 16.6% 13.6% 11.9% 12.9%
Expected CZ Range NA NA $3.25-$5.75 $3.25-$5.75 $3.25-$5.75 $3.25-$5.75Expected Avg Farm PriceRange $6.89 $4.46 $3.35-$3.95 $3.26 $3.46 $3.66 $3.25
2 USDA Jan
Corn Demand: Ethanol
1/14/2015 USDA2 USDA2USDA Jan 2014/15 2015/16
CORN 2012/13 2013/14 2014/15 Poor Trend High Trend
Planted Acres (myn a) 97.3 95.4 90.6 90.6 90.6 90.6 88.5 Harvested Acres 87.4 87.5 83.1 83.1 83.1 83.1 81.3 Abandonment -10.2% -8.3% -8.3% -8.3% -8.3% -8.3% -8.1%Yield 123.1 158.1 171.0 171.0 171.0 171.0 167.2Beginning Stocks 989 821 1,232 1,232 1,232 1,232 1,851 Production 10,755 13,829 14,216 14,216 14,216 14,216 13,593 Imports 160 36 25 25 25 25 30 Total Supply & Impts 11,904 14,686 15,472 15,473 15,473 15,473 15,475 Feed/Residual 4,315 5,036 5,275 5,228 5,278 5,328 5,336 Food, Seed, Industrial 6,038 6,501 6,570 6,544 6,618 6,744 6,565
Ethanol for Fuel 4,641 5,134 5,175 5,114 5,214 5,314 5,175 Domestic Use, Total 10,353 11,537 11,845 11,772 11,896 12,072 11,901 Exports 730 1,917 1,750 1,500 1,725 1,750 1,800 Total Use 11,083 13,454 13,595 13,272 13,622 13,822 13,701
Ending Stocks 821 1,232 1,877 2,201 1,851 1,651 1,774 U.S. Stocks/Use Ratio 7.4% 9.2% 13.8% 16.6% 13.6% 11.9% 12.9%
Expected CZ Range NA NA $3.25-$5.75 $3.25-$5.75 $3.25-$5.75 $3.25-$5.75Expected Avg Farm PriceRange $6.89 $4.46 $3.35-$3.95 $3.26 $3.46 $3.66 $3.25
2 USDA Jan
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 20140
1000
2000
3000
4000
5000
6000
707996
1,168 1,3231,603
2,119
3,049
3,709
4,591
5,019 5,0004,641
5,134 5,175
MB
UCorn Demand: Ethanol
USDA forecast looks low, exports?
Year-to-date paceRunning at 5,290
Ethanol Margins…
Corn Balance Sheet: Supply & Demand
What does 2015 look like?
2012/13: Carryout: 821 mbuAvg Farm Price: $6.89
2013/14: Carryout: 1,232 mbuAvg Farm Price: $4.46
SOYBEANS
90/91
91/92
92/93
93/94
94/95
95/96
96/97
97/98
98/99
99/00
00/01
01/02
02/03
03/04
04/05
05/06
06/07
07/08
08/09
09/10
10/11
11/12
12/13
13/14
14/15
0%
5%
10%
15%
20%
25%
30%
35% 32%
11%
World Stocks to Use US Stocks to UseSource: USDA
World & U.S. Soybeans Stocks to Use Ratio
Could see an almost unprecedented build in the world stocks “cushion” this year?US from 3% to 11%World from 24% to 32% (prev hi 28%)
19
80
19
82
19
84
19
86
19
88
19
90
19
92
19
94
19
96
19
98
20
00
20
02
20
04
20
06
20
08
20
10
20
12
20
14
25.0
30.0
35.0
40.0
45.0
50.0
0.0
2.0
4.0
6.0
8.0
10.0
12.0
26.5
30.1
31.5
26.2
28.1
34.133.3
33.9
27.0
32.3
34.134.2
37.6
32.6
41.4
35.3
37.6
38.938.9
36.6
38.1
39.6
38.0
33.9
42.243.142.9
41.7
39.7
44.043.5
42.0
40.0
44.0
47.8
U.S. Soybean Yields
Vs Trend Actual
bp
a
vers
us t
ren
d,
bp
a
Certainly an above trend yield year!
01/02
02/03
03/04
04/05
05/06
06/07
07/08
08/09
09/10
10/11
11/12
12/13
13/14
14/15
-30
-20
-10
0
10
20
30
40
50
60
$0.00
$2.00
$4.00
$6.00
$8.00
$10.00
$12.00
$14.00
$16.00
Prod Chge Use Chge Avg Frm Prx
MM
T
$/B
U (
US
)
Production to outpace use for 3rd straight year
“Bearish price statement”
Can S. American ship it?
World Soybean Production, Use and US Price
Record Soybean Production Projected in South America for 14/15
Source: USDA
- 500,000
1,000,000 1,500,000 2,000,000 2,500,000 3,000,000 3,500,000 4,000,000 4,500,000 5,000,000 5,500,000 6,000,000 6,500,000
0%
10%
20%
30%
40%
50%
60%
28%30% 31%
34%
30%32% 32%
36% 35%37%
41%42%
48% 48%46% 47%
49%53%
45%
51% 51%
48%
54% 53% 53%
USDA: South American Soybean Production
Argentina Uruguay Paraguay Brazil Bolivia USA SAM Share of World
MB
U
Protein Consumption in China has Expanded Rapidly
Source: USDA
198
198
198
198
198
199
199
199
199
199
200
200
200
200
200
201
201
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000China Meal Consumption
Meal, Rapeseed Meal, Soybean Meal, Sunflowerseed
10
00
MT
China demand drives soybean market!!
Soybean Demand: Exports
Source: : USDA, Advance Trading, Inc.Source: : USDA, Advance Trading, Inc.
1/14/2015 USDA2 USDA2USDA Jan 2014/15 2015/16
SOYBEAN 2012/13 2013/14 2014/15 Poor Trend High Trend
Planted Acres 77.2 76.8 83.7 83.7 83.7 83.7 89.0 Harvested Acres 76.1 76.3 83.1 83.1 83.1 83.1 88.1Abandonment -1.4% -0.7% -0.7% -0.7% -0.7% -0.7% -1.0%Yield 40.0 44.0 47.8 47.8 47.8 47.8 45.4 Beginning Stocks 169 141 92 92 92 92 370 Production 3,042 3,358 3,969 3,972 3,972 3,973 3,998 Imports 41 72 15 15 15 15 15 Total Supply & Impts 3,252 3,570 4,076 4,079 4,079 4,080 4,383 Seed/Residual 105 97 116 110 120 130 125 Crush 1,689 1,734 1,780 1,760 1,785 1,795 1,825 Domestic Use, Total 1,794 1,831 1,896 1,870 1,905 1,925 1,950 Exports 1,317 1,647 1,770 1,770 1,805 1,840 1,800 Total Use 3,111 3,478 3,666 3,640 3,710 3,765 3,750 SAM Production MMT (5) 146 155 165 165 165 165 165 U.S. Ending Stocks 141 92 410 440 370 316 633 World Ending Stocks MMT 57 67 91 91 91 91 90 U.S. Stocks/Use Ratio 4.5% 2.7% 11.2% 12.1% 10.0% 8.4% 16.9%Expected SX Range NA NA $8.25-12.75 $8.25-$12.75 $8.25-$12.75 $9.20-$12.75
Expected Avg Farm Price/Range $14.40 $13.00 $9.45-$10.95 $8.81 $9.31 $9.81 $8.77
2 USDA Jan
Yield raised 0.3 bpaExports raised 10mbuCarryout unchanged
02 03 04 05 06 07 08 09 10 11 12 13 14-F0
200
400
600
800
1,000
1,200
122 96 110 43 83 72 64 58 48 15
73 78 108
77 74 57
55 64 61 53 52 48
35 50 41
45
69 70 69
58 78 62 43 78 86
45
92 92 95
70 64 55
55
63 54
45 61 57
51
54 50 71
102 212 249
178
211 220 320
474 543
408
545 650
764
YTD Soybean Exports Shipped by Destination Source: USDA Export Sales
Total Known/Unknown E Europe Far East Oth Asia/Africa W Hemi Mainland China
MBU
Source: USDA Export Sales
18WEEK:
70% of shipments to China so far
Soybean Demand: Crush1/14/2015 USDA2 USDA2
USDA Jan 2014/15 2015/16
SOYBEAN 2012/13 2013/14 2014/15 Poor Trend High Trend
Planted Acres 77.2 76.8 83.7 83.7 83.7 83.7 89.0 Harvested Acres 76.1 76.3 83.1 83.1 83.1 83.1 88.1Abandonment -1.4% -0.7% -0.7% -0.7% -0.7% -0.7% -1.0%Yield 40.0 44.0 47.8 47.8 47.8 47.8 45.4 Beginning Stocks 169 141 92 92 92 92 370 Production 3,042 3,358 3,969 3,972 3,972 3,973 3,998 Imports 41 72 15 15 15 15 15 Total Supply & Impts 3,252 3,570 4,076 4,079 4,079 4,080 4,383 Seed/Residual 105 97 116 110 120 130 125 Crush 1,689 1,734 1,780 1,760 1,785 1,795 1,825 Domestic Use, Total 1,794 1,831 1,896 1,870 1,905 1,925 1,950 Exports 1,317 1,647 1,770 1,770 1,805 1,840 1,800 Total Use 3,111 3,478 3,666 3,640 3,710 3,765 3,750 SAM Production MMT (5) 146 155 165 165 165 165 165 U.S. Ending Stocks 141 92 410 440 370 316 633 World Ending Stocks MMT 57 67 91 91 91 91 90 U.S. Stocks/Use Ratio 4.5% 2.7% 11.2% 12.1% 10.0% 8.4% 16.9%Expected SX Range NA NA $8.25-12.75 $8.25-$12.75 $8.25-$12.75 $9.20-$12.75
Expected Avg Farm Price/Range $14.40 $13.00 $9.45-$10.95 $8.81 $9.31 $9.81 $8.77
2 USDA Jan
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 20141350
1400
1450
1500
1550
1600
1650
1700
1750
1800
1850
1700
1615
1530
1696
1739
1808 1803
1662
1752
1648
1703 1689
1734
1780
MB
USoybean Demand: Crush
Both SBM exports and domesticuse increasing crush
Soybean Balance Sheet: Supply & Demand
Source: : USDA, Advance Trading, Inc.
Soybean Balance Sheet: Supply & Demand
Source: : USDA, Advance Trading, Inc.
WHEAT
Source: USDA
World & U.S. Wheat Stocks to Use Ratio1
99
0
19
91
19
92
19
93
19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
140%
10%
20%
30%
40%
50%
60%
26%25%
27% 28%26%
24% 24%
29%31% 30% 30% 29%
24%
19%22% 21%
18% 17%
21%
25% 25%23%
21% 21% 22%
36%
20%21%
23%20%
16%
19%
31%
39% 40%
37% 36%
25%23% 24%
27%
22%
13%
29%
48%
36%33%
30%
24%
33%
World and US Wheat Stocks to Use Ratio
U.S. SRW Wheat Planted Acreage Set to Decline Further in 2015
19
85
19
86
19
87
19
88
19
89
19
90
19
91
19
92
19
93
19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
es
t 2
01
5
0
2
4
6
8
10
12
14
16U.S. SRW Planted Acreage: 1985-2015
Mil
lio
n a
cre
s
Source: USDA
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
est 2
015
20
25
30
35
40
45U.S. HRW Planted Acreage: 1985-2015
Mill
ion
acre
s
Source: USDA
U.S. HRW Planted Acreage Forecast at a 6-Year High in 2015
Soft Red Wheat Balance Sheet: Supply & Demand
All Wheat Balance Sheet: Supply & Demand
Marketing
19901991
19921993
19941995
19961997
19981999
20002001
20022003
20042005
20062007
20082009
20102011
20122013
2014F$30$40$50$60$70$80$90
$100$110$120$130$140$150
Net Farm Income and Net Cash Income
Net Farm Net Cash
Billi
on $
Source: ERS - Farm Income and Wealth Statistics
Source: CME Group
Corn Price VolatilityCORN
Year High Low Change
2015* $4.10 $3.90 $0.20 2014 $5.20 $3.18 $2.01 2013 $7.49 $4.10 $3.39 2012 $8.44 $5.51 $2.93 2011 $8.00 $5.70 $2.30 2010 $6.30 $3.25 $3.05 2009 $4.50 $3.00 $1.50 2008 $7.63 $2.90 $4.73 2007 $4.57 $3.09 $1.48 2006 $3.92 $2.04 $1.88 2005 $2.63 $1.86 $0.77 2004 $3.35 $1.91 $1.44 2003 $2.62 $2.05 $0.57 2002 $2.85 $1.91 $0.94 2001 $2.30 $1.84 $0.46
$0.00$1.00$2.00$3.00$4.00$5.00$6.00$7.00$8.00$9.00
20
15
*
20
14
20
13
20
12
20
11
20
10
20
09
20
08
20
07
20
06
20
05
20
04
20
03
20
02
Corn Volatility
High Low
Fourteen Year Average Volatility for Corn = $1.96 2010 - 2014 Average Volatility for Corn = $2.74
Source: CME Group
Fourteen Year Average Volatility for Soybeans = $4.29 2010 - 2014 Average Volatility for Soybeans = $5.02
SOYBEANS
Year High Low Change
2015* $10.59 $10.02 $0.57 2014 $15.37 $9.04 $6.33 2013 $16.30 $12.55 $3.75 2012 $17.95 $11.50 $6.45 2011 $14.56 $10.94 $3.62 2010 $13.94 $9.00 $4.94 2009 $12.91 $8.44 $4.47 2008 $16.60 $7.77 $8.83 2007 $12.30 $6.47 $5.83 2006 $6.93 $5.27 $1.66 2005 $7.52 $4.99 $2.53 2004 $10.64 $5.01 $5.63 2003 $8.02 $5.32 $2.70 2002 $6.25 $4.16 $2.09 2001 $5.38 $4.20 $1.18
$0.00
$5.00
$10.00
$15.00
$20.00
20
15
*
20
14
20
13
20
12
20
11
20
10
20
09
20
08
20
07
20
06
20
05
20
04
20
03
20
02
Soybean Volatility
High Low
Soybean Price Volatility
Wheat Price Volatility
Source: CME Group
$0.00
$2.00
$4.00
$6.00
$8.00
$10.00
$12.00
$14.00
20
15
*
20
14
20
13
20
12
20
11
20
10
20
09
20
08
20
07
20
06
20
05
20
04
20
03
20
02
Wheat Volatility
High Low
Fourteen Year Average Volatility for Wheat = $2.88 2010 - 2014 Average Volatility for Wheat = $2.39
Year High Low Change2015* $6.04 $5.62 $0.42 2014 $7.35 $4.66 $2.69 2013 $8.00 $5.99 $2.01 2012 $9.47 $5.90 $3.58 2011 $8.92 $5.72 $3.20 2010 $8.04 $4.26 $3.78 2009 $6.76 $4.29 $2.47 2008 $13.00 $4.55 $8.45 2007 $10.09 $4.12 $5.97 2006 $5.57 $3.21 $2.36 2005 $3.69 $2.87 $0.82 2004 $4.24 $2.83 $1.42 2003 $4.09 $2.73 $1.36 2002 $4.34 $2.56 $1.79 2001 $2.95 $2.43 $0.52
2009: Argentina crop experiences major drought
The following comes from an episode of Louis CK’s TV show, Louie, as part of one of the short stand-up routines he intermittently mixes into the show. Reminds us of how we manage risk sometimes…
“You try to keep your kids safe. Like, if my kids get in a car with me, I make them buckle up. I make a big deal out of it; I’m not even starting this car until you buckle your seat belts.
But if we get in a taxi, I’m like, ‘Just…it’s fine. Taxis are magic, nobody dies. Just get in, just go.”
The Economist January 3rd, 2015
“In The Next 40 Years,Humans Will Need To ProduceMore Food Than In The Last
10,000 Years Combined.”
Back to Basics…
Things can and will change… And quickly…
• GMO• Ethanol regulations• Livestock regulations• World production• World Politics and Policy• Outside markets or invest money
Back to Basics…
Back to Basics…December 23, 2014“Half of All Children Will Be Autistic by 2025”. Stephanie Seneff, PhDSenior Research Scientist at MIT
At a conference last Thursday, in a special panel discussion about GMOs, she took the audience by surprise when she declared, “At today’s rate, by 2025, one in two children will be autistic.” She noted that the side effects of autism closely mimic those of glyphosate toxicity, and presented data showing a remarkably consistent correlation between the use of Roundup on crops (and the creation of Roundup-ready GMO crop seeds) with rising rates of autism. Children with autism have biomarkers indicative of excessive glyphosate, including zinc and iron deficiency, low serum sulfate, seizures, and mitochondrial disorder.
Wisconsin Supreme Court Holds Manure is a Pollutant Under Farm Insurance PolicyDecember 31, 2014
On December 30, 2014, the Wisconsin Supreme Court reversed a court of appeals decision in Wilson Mutual Insurance Co. v. ---, 2014 WI 136 (Wis. 2014), holding that manure that contaminates a well is a “pollutant,” and is therefore not covered under a farm’s general liability insurance policy. This is a precedent setting decision, and it will affect whether farms in Wisconsin that allegedly cause the contamination of wells with manure will be able to rely on insurance to pay for damages. Given the supreme court’s holding, farms relying on standard general liability policies may not have insurance coverage for personal and property damage claims arising from well contamination caused by manure. In Wilson Mutual Ins. Co., the ---, dairy farmers in Washington County, fertilized their fields with manure from their dairy cows according to a nutrient management plan prepared by an agronomist and approved by the county conservation office. A few months later, the Wisconsin Department of Natural Resources alleged that the farm’s manure had polluted an aquifer and neighboring wells. Thereafter, the neighboring landowners sought compensation from the Falks for damages arising out of the well contamination.
Livestock Production, Risks vs Rewards
• Any strategy/risk management plan should be simple enough that it can be explained and understood in a typical conversation.
• Expect and Welcome Price Volatility!
• Things can and will change… Just look again at the energy markets!
Back to Basics…
Example of how quickly things can change……
Example of how quickly things can change……
Where is (fill in “blank”) in the “cycle”? Here?
Or here?
January 27, 2015?
Why manage price if below break-even?
Good question!
• As long as you plan on planting a crop irrespective of break-even, you have downside price risk to loan rate on unprotected production.
• If prices go higher (price risk doesn’t occur), make certain your strategy performs well and is flexible.
Back to Basics…
• Do nothing• Forward Cash Sales• Futures• Options • Structured products• Let someone else do it
Marketing Opportunities
Back to Basics…
Back to Basics…Options Fit Farmers For Price Risk Management
Those who say options do not work either have limited experience with them or have not managed them properly.
Back to Basics…
Do you want to risk a premium (fixed amount) or risk hard earned equity?
Options need a second look if you aren’t using them or have a negative impression of them.
Back to Basics…
The emotional or psychological part
of marketing is real.
Options control Emotions.
Back to Basics…• You have grain that has zero production risk (old crop that is already harvested). Why have you not sold it? Optimistic?
• Remember the concern or “heavy feeling” in late September/early Oct when we were $3.00 futures?
• Cost of storage is something. AND you still have downside risk… Exchange the cost with a long call.
Unpriced Old crop grain on farm or in storage…
Risks/costs: Storage costs
Lower prices Quality
Opportunities: Higher prices
Back to Basics…
How do you get rid of
these cost/risks?
Unpriced Old crop grain on farm or in storage…
Risks/costs: Storage costs
Lower prices Quality
Opportunities: Higher prices
Back to Basics…
Sell Cash!
BUT, also loose upside opportunity.
Back to Basics…
Do NOT want to trade one risk for another on a substantial percentage of crop. i.e. Downside risk for upside risk
That becomes price prediction.
Unpriced Old crop grain on farm or in storage…
Risks/costs: Storage costs
Lower prices Quality
Opportunities: Higher prices
Back to Basics…
Sell Cash!
How can I retain upside price opportunities? Using a long call.
Back to Basics…• Many are looking at new crop – hard to manage the new crop until the old crop is managed.
• New crop soybeans are in the black – should protect against lower prices
• The market didn’t care when growers were making $400/per acre and it doesn’t care if you are losing $100-200.
This material is a solicitation to enter into a derivatives transaction. The information and data contained herein have been obtained from sources believed to be reliable but Advance Trading Inc. ("Advance") does not warrant their accuracy or completeness. Recommendations and opinions contained herein reflect the judgment of Advance as of the date hereof, are subject to change, and are based on certain assumptions, only some of which are noted herein. Different assumptions could yield substantially different results. You are cautioned that there is no universally accepted method for analyzing financial instruments. Advance does not guarantee any results and there is no guarantee as to the liquidity of the instruments involved in our analysis. Advance, its affiliates, and its and their officers, directors, and employees may sell or purchase, for their own account or for customers, positions in futures, options or other instruments which may be similar or different from the positions referred to herein. As a matter of policy, Advance does not give tax, accounting, regulatory or legal advice to clients. Clients therefore should consult their own advisors regarding the tax, accounting and legal implications of the recommended strategies before transactions are affected. Trading commodity futures and options involves significant risk and is not appropriate for all investors. Information relating to past performance is not necessarily indicative of future results.
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