FARRM: A Holistic Risk Management Simulation Game

“The thrill of victory, the agony of defeat”

Kim Anderson

J.C. Hobbs

Oklahoma State University

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We had a plan

Game to be the “hook”Resource allocationMarketingBudgetsFinancial analysisRisk management

Develop a risk management workshop

FARRM

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Wheat & Stockers640 acres of owned crop land640 acres of rented crop land0.5 head/acre winter grazing1.5 head/acre grazeout

Paper FARRM

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Gains from Marshal Pasture ResearchYields from county and farm recordsPrices

Paper FARRM

CashForward contractFuturesOption premiums

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Marketing alternativesCashFuturesOptionsWheat storage

Paper FARRM

Enterprise budgets

ChartsYearend summary

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July Crop and Stocker Selection.September Wheat crop insurance.September Sell grain sorghum.November Sell cotton, stored wheat.January Stocker marketing risk decisions.March Sell March stockers.April Wheat marketing risk decisions.May Sell May stockers.June Wheat sell/storage/marketing

decisions.

Paper FARRM decisions

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Great results

Paper FARRM

NegativeSpent most of the time calculating resultsComputational errors detracted fromlearning

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By “hook” & by “crook”Programmed in Visual BasicUsed MS Access for dataBuilt FARRM in sectionsAdded crop insuranceAdded cash flow sheet & analysis

Computer-FARRM

Unable to obtain funding

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StockersOctober – MarchOctober – May grazeout

Computer-FARRM

WheatPre-harvest strategiesPost-harvest strategies

CottonGrain Sorghum

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Wheat to sorghum/cottonSorghum/cotton on owned land only.Double crop wheat to S/C from grazeout.Skip one wheat crop to go to S/C

Computer-FARRM

Sorghum/cotton to wheatNo winter grazingCan grazeout

Rules

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RulesStockers

Grazeout on owned acres only.Winter grazing .5 hd/ac. or 2 ac/hd.Grazeout 1.5 hd/ac.

Computer-FARRM

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Very SuccessfulExpanded time for teachingMost participants enjoyed model

ProducersHigh school students

Computer-FARRM

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Problems120+ MS Access filesOnly 4.5 years run timeGremlinsAestheticsSupporting material

Computer-FARRM

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Increase from 5 years to 15 yearsLotus 1,2,3 data format

1 workbook with 5 sheets

Improve looksImprove ease of use

Computer-FARRM V. 2

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$12,000 programming$2,000 data collection$1,000 travel & supplies

Computer-FARRM V. 2

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Hired programmerJunior CIS majorFound and recommended by . . .

Computer-FARRM V. 2

ProvidedOfficeComputerLaptop

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Programmer problems

Still worked but productivity declined

Computer-FARRM V. 2

Good progress

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Potential for FARRM

Computer-FARRM V. 2

High school ag students

Model for other statesRelatively easy to insert

enterprisesData modification

relatively easy

Producer risk management workshops

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Programming is expensive.

Lessons learned

Good reliable programmers are hard to find.

Model development takes time—years.

Supervising is frustrating unless you know how to program.

Computer games may be used to “set the hook” for teaching risk management.

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Go Cowboys