school of economic sciences college of agricultural, human, and natural resource sciences
DESCRIPTION
Art. Understanding Markets and Marketing: Introduction. Randy Fortenbery. School of Economic Sciences College of Agricultural, Human, and Natural Resource Sciences Washington State University. The objective of marketing is:. NOT to make money in the futures market. - PowerPoint PPT PresentationTRANSCRIPT
Art
School of Economic SciencesCollege of Agricultural, Human, and
Natural Resource SciencesWashington State University
Randy Fortenbery
Understanding Markets and Marketing:
Introduction
The objective of marketing is:
• NOT to make money in the futures market.• NOT to sell at the highest price of the year.• NOT to generate accurate price forecasts.
• TO earn a reasonable return on investment• TO minimize the risk associated with achieving a
target level of income.
US Wheat Balance Sheet (June/May)USDA USDA
USDA USDA USDA USDA USDA USDA Jan Est. Jan Fore.Marketing Year 05/06 06/07 07/08 08/09 09/10 10/11 11/12 12/13
Beg Stocks 540 571 456 306 657 976 862 743Imports 81 122 113 127 119 97 112 130
Acres Planted 57.2 57.3 60.5 63.2 59.2 53.6 54.4 55.7Acres Harvested 50.1 46.8 51 55.7 49.9 47.6 45.7 49% Harvested 87.6% 81.7% 84.3% 88.1% 84.3% 88.8% 84.0% 88.0%Yield 42.0 38.6 40.2 44.9 44.5 46.3 43.7 46.3Production 2,105 1,808 2,051 2,499 2,218 2,207 1,999 2,629Total Supply 2,726 2,501 2,620 2,932 2,993 3,279 2,974 3,142
Food 915 938 948 927 919 926 941 950Seed 78 82 88 78 69 71 76 75Feed and Residual 160 117 16 255 150 132 164 350Exports 1,003 908 1,263 1,015 879 1,289 1,050 1,050Total Demand 2,156 2,045 2,315 2,275 2,017 2,418 2,231 2,425
Ending Stocks 571 456 306 657 976 862 743 716Stocks To Use 26.48% 22.30% 13.22% 28.88% 48.39% 35.65% 33.30% 29.53%
Avg. Farm Price $3.42 $4.26 $6.48 $6.78 $4.87 $5.70 $7.24 $7.90
1/31/2
002
6/3/2
002
10/3/2
002
2/3/2
003
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003
10/3/2
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006
6/3/2
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10/3/2
006
2/3/2
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6/3/2
007
10/3/2
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2/3/2
008
6/3/2
008
10/3/2
008
2/3/2
009
6/3/2
009
10/3/2
009
2/3/2
010
6/3/2
010
10/3/2
010
2/3/2
011
6/3/2
011
10/3/2
011
2/3/2
012
6/3/2
012
10/3/2
012$0.00
$2.00
$4.00
$6.00
$8.00
$10.00
$12.00
$14.00
$16.00
Cash Grain Prices
Wheat Corn Soybeans
$/bu
Wheat as a Feed Grain
Wheat prices over the last year or so have been supported by feed demand
1/6/2
006
3/3/2
006
4/28/2
006
6/23/2
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2/2/2
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3/30/2
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5/25/2
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2/29/2
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6/20/2
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8/15/2
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10/10/2
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12/5/2
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1/30/2
009
3/27/2
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5/22/2
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7/17/2
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9/11/2
009
11/6/2
009
1/1/2
010
2/26/2
010
4/23/2
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6/18/2
010
8/13/2
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10/8/2
010
12/3/2
010
1/28/2
011
3/25/2
011
5/20/2
011
7/15/2
011
9/9/2
011
11/4/2
011
12/30/2
011
2/24/2
012
4/20/2
012
6/15/2
012
8/10/2
012
10/5/2
012
11/30/2
012$0.00
$2.00
$4.00
$6.00
$8.00
$10.00
$12.00
$14.00
Corn vs. Wheat Price
Nearby Corn Futures Price Nearby Wheat Price
Feed Demand Summary
• Cattle numbers are declining because of drought conditions in the Southern Plains.
• Dairy margins are stressed.• Corn feed demand was currently projected to be
down about 2 percent from last year.
Volatility Perceptions
Biofuel production has driven up commodity prices, and increased
commodity price volatility.
1995
/96
1996
/97
1997
/98
1998
/99
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/00
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/01
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/09
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/10
2010
/11
0
1000
2000
3000
4000
5000
6000
7000US Corn Use
Food, Seed, and Industrial Ethanol for fuelFeed and Residual
1996/97
1997/98
1998/99
1999/00
2000/01
2001/02
2002/03
2003/04
2004/05
2005/06
2006/07
2007/08
2008/09
2009/10
2010/11
2011/12
2012/13
0
1000
2000
3000
4000
5000
6000
7000
U.S. Corn Use
Ethanol Total Industrial Use (including food and seed) Feed Demand
Mill
ion
Bush
els
US Corn Balance Sheet (Sep/Aug)USDA USDA
USDA USDA USDA USDA USDA USDA Jan. Est. Jan. Fore.Marketing Year 05/06 06/07 07/08 08/09 09/10 10/11 11/12 12/13
Beg Stocks 2,114 1,967 1,304 1,624 1,673 1,708 1,128 989Imports 9 12 20 14 8 28 29 100
Acres Planted 81.5 78.3 93.5 86 86.4 88.2 91.9 97.2Acres Harvested 75.1 70.6 86.5 78.6 79.5 81.4 84 87.4% Harvested 92.1% 90.2% 92.5% 91.4% 92.0% 92.3% 91.4% 89.9%Yield 148.0 149.1 150.7 153.9 164.7 152.8 147.2 123.4Production 11,114 10,535 13,038 12,101 13,092 12,447 12,360 10,780Total Supply 13,237 12,514 14,362 13,739 14,774 14,182 13,516 11,869
Feed & residual 6,155 5,595 5,913 5,254 5,125 4,795 4,548 4,540Food/Seed/Ind. 2,981 3,490 4,387 4,953 5,961 6,426 6,437 5,867
Ethanol 1,603 2,119 3,049 3,677 4,591 5,019 5,011 4,500Exports 2,134 2,125 2,437 1,858 1,980 1,834 1,543 950Total Demand 11,270 11,210 12,737 12,065 13,066 13,055 12,527 11,267
Ending Stocks 1,967 1,304 1,624 1,674 1,708 1,128 989 602Stocks To Use 17.45% 11.63% 12.75% 13.87% 13.07% 8.64% 7.89% 5.34%
Avg. Farm Price $2.00 $3.04 $4.20 $4.06 $3.55 $5.18 $6.22 $7.40
Actual Corn Price Compared to Price
Expected from Supply/Demand System
1990199119921993199419951996199719981999200020012002200320042005200620072008200920102011$10.00
$20.00
$30.00
$40.00
$50.00
$60.00
$70.00
$80.00
$90.00
$100.00
$110.00
$1.50
$2.00
$2.50
$3.00
$3.50
$4.00
$4.50
$5.00
$5.50
$6.00
Corn vs. Oil Prices
Crude Oil ($/ba) Corn ($/bu)
$/b
a
$/b
u
Current Ethanol Situation
• The current renewable fuels standards limits corn based ethanol to contributing 15 billion gallons towards the 35 billions gallon target by 2022. Production in 2011 was about 14.2 billion gallons.
• Blending subsidy of 45 cents per gallon eliminated in 2012, as well as 54 cent per gallon Brazilian import tariff.
• Less important driver of corn prices moving forward, and not and important driver of price volatility.
Volatility Perceptions
Speculative activity in the derivative (especially futures) markets has resulted in
increased price volatility and inefficient price discovery.
1/6/
2009
1/26
/200
9
2/15
/200
9
3/7/
2009
3/27
/200
9
4/16
/200
9
5/6/
2009
5/26
/200
9
6/15
/200
9
7/5/
2009
7/25
/200
9
8/14
/200
9
9/3/
2009
9/23
/200
9
10/1
3/20
09
11/2
/200
9
11/2
2/20
09
12/1
2/20
09
1/1/
2010
1/21
/201
0
2/10
/201
0
3/2/
2010
3/22
/201
0
4/11
/201
0
5/1/
2010
5/21
/201
0
6/10
/201
0
6/30
/201
0
7/20
/201
0
8/9/
2010
8/29
/201
0
9/18
/201
0
10/8
/201
0
10/2
8/20
10
11/1
7/20
10
12/7
/201
0
12/2
7/20
10
1/16
/201
1
2/5/
2011
200000
400000
600000
800000
1000000
1200000
1400000
1600000
1800000
Corn Open Interest - Long
Commercial Long Positions Reportable Long Positions
1/12
/199
9
6/12
/199
9
11/1
2/19
99
4/12
/200
0
9/12
/200
0
2/12
/200
1
7/12
/200
1
12/1
2/20
01
5/12
/200
2
10/1
2/20
02
3/12
/200
3
8/12
/200
3
1/12
/200
4
6/12
/200
4
11/1
2/20
04
4/12
/200
5
9/12
/200
5
2/12
/200
6
7/12
/200
6
12/1
2/20
06
5/12
/200
7
10/1
2/20
07
3/12
/200
8
8/12
/200
8
1/12
/200
9
6/12
/200
9
11/1
2/20
09
4/12
/201
0
9/12
/201
0
2/12
/201
1
7/12
/201
1-600000
-400000
-200000
0
200000
400000
600000
$0.00
$1.00
$2.00
$3.00
$4.00
$5.00
$6.00
$7.00
$8.00
$9.00
Corn Futures Price vs. Trader Activity
Speculators' Net Positions Hedgers Net Positions Nearby Futures Price
0
2
4
6
8
10
12
$0.00
$2.00
$4.00
$6.00
$8.00
$10.00
$12.00
$14.00Wheat Price and Futures Trading Activity
Speculators Net Position Hedgers Net Position Wheat Futures Price
5/29
/200
7
7/17
/200
7
9/4/
2007
10/2
3/20
07
12/1
1/20
07
1/29
/200
8
3/18
/200
8
5/6/
2008
6/24
/200
8
8/12
/200
8
9/30
/200
8
11/1
8/20
08
1/6/
2009
2/24
/200
9
4/14
/200
9
6/2/
2009
7/21
/200
9
9/8/
2009
10/2
7/20
09
12/1
5/20
09
2/2/
2010
3/23
/201
0
5/11
/201
0
6/29
/201
0
8/17
/201
0
10/5
/201
0
11/2
3/20
10
1/11
/201
1
3/1/
2011
4/19
/201
1
6/7/
2011
7/26
/201
1
9/13
/201
1-80000
-60000
-40000
-20000
0
20000
40000
60000
80000
100000
$0.00
$2.00
$4.00
$6.00
$8.00
$10.00
$12.00
$14.00
Wheat Price and Futures Trading Activity
Speculators Net Position Hedgers Net Position Nearby Wheat Futures Price
1/3/
2006
3/7/
2006
5/9/
2006
7/11
/200
6
9/12
/200
6
11/1
4/20
06
1/16
/200
7
3/20
/200
7
5/22
/200
7
7/24
/200
7
9/25
/200
7
11/2
7/20
07
1/29
/200
8
4/1/
2008
6/3/
2008
8/5/
2008
10/7
/200
8
12/9
/200
8
2/10
/200
9
4/14
/200
9
6/16
/200
9
8/18
/200
9
10/2
0/20
09
12/2
2/20
09
2/23
/201
0
4/27
/201
0
6/29
/201
0
8/31
/201
0
11/2
/201
0
1/4/
2011
3/8/
2011
5/10
/201
1
7/12
/201
1
9/13
/201
10
100000
200000
300000
400000
500000
600000
$0.00
$1.00
$2.00
$3.00
$4.00
$5.00
$6.00
$7.00
$8.00
$9.00
Corn Futures Price vs. Trader Activity
Speculators' Net Positions Nearby Futures Price
Axis Title
5/29
/200
7
7/10
/200
7
8/21
/200
7
10/2
/200
7
11/1
3/20
07
12/2
5/20
07
2/5/
2008
3/18
/200
8
4/29
/200
8
6/10
/200
8
7/22
/200
8
9/2/
2008
10/1
4/20
08
11/2
5/20
08
1/6/
2009
2/17
/200
9
3/31
/200
9
5/12
/200
9
6/23
/200
9
8/4/
2009
9/15
/200
9
10/2
7/20
09
12/8
/200
9
1/19
/201
0
3/2/
2010
4/13
/201
0
5/25
/201
0
7/6/
2010
8/17
/201
0
9/28
/201
0
11/9
/201
0
12/2
1/20
10
2/1/
2011
3/15
/201
1
4/26
/201
1
6/7/
2011
7/19
/201
1
8/30
/201
1
10/1
1/20
11-80000
-60000
-40000
-20000
0
20000
40000
60000
$4.00
$5.00
$6.00
$7.00
$8.00
$9.00
$10.00
$11.00
$12.00
$13.00
Wheat Price vs. Speculators' Net Positions
Speculators Net Position Wheat Futures Price
Empirical Evidence• Work by the CFTC looking at 2008 oil prices
suggested that speculators were not the cause of either price levels or price volatility
• Similar results were found by Irwin et. al looking at soybean markets.
• DESPITE THIS: Perception is driving policy.
Volatility Perceptions
International economic events have become more important than basic market
fundamentals in determining price levels and volatility.
1/6/
2006
3/3/
2006
4/28
/200
6
6/23
/200
6
8/18
/200
6
10/1
3/20
06
12/8
/200
6
2/2/
2007
3/30
/200
7
5/25
/200
7
7/20
/200
7
9/14
/200
7
11/9
/200
7
1/4/
2008
2/29
/200
8
4/25
/200
8
6/20
/200
8
8/15
/200
8
10/1
0/20
08
12/5
/200
8
1/30
/200
9
3/27
/200
9
5/22
/200
9
7/17
/200
9
9/11
/200
9
11/6
/200
9
1/1/
2010
2/26
/201
0
4/23
/201
0
6/18
/201
0
8/13
/201
0
10/8
/201
0
12/3
/201
0
1/28
/201
1
3/25
/201
1
5/20
/201
1
7/15
/201
1
9/9/
2011
70
75
80
85
90
95
$3.00
$4.00
$5.00
$6.00
$7.00
$8.00
$9.00
$10.00
$11.00
$12.00
$13.00
Wheat Price vs. The Value of the Dollar
Nearby Dollar Index Nearby Wheat Price
1/6/2
012
1/15/2
012
1/24/2
012
2/2/2
012
2/11/2
012
2/20/2
012
2/29/2
012
3/9/2
012
3/18/2
012
3/27/2
012
4/5/2
012
4/14/2
012
4/23/2
012
5/2/2
012
5/11/2
012
5/20/2
012
5/29/2
012
6/7/2
012
6/16/2
012
6/25/2
012
7/4/2
012
7/13/2
012
7/22/2
012
7/31/2
012
8/9/2
012
8/18/2
012
8/27/2
012
9/5/2
012
9/14/2
012
9/23/2
012
10/2/2
012
10/11/2
012
10/20/2
012
10/29/2
012
11/7/2
012
11/16/2
012
11/25/2
012
12/4/2
012
12/13/2
012
12/22/2
012
12/31/2
012
1/9/2
01378
79
80
81
82
83
84
$6.00
$6.50
$7.00
$7.50
$8.00
$8.50
$9.00
$9.50
Wheat Price vs. The Value of the Dollar
Nearby Dollar Index Nearby Wheat Price
1/6/2
006
3/10/2
006
5/12/2
006
7/14/2
006
9/15/2
006
11/17/2
006
1/19/2
007
3/23/2
007
5/25/2
007
7/27/2
007
9/28/2
007
11/30/2
007
2/1/2
008
4/4/2
008
6/6/2
008
8/8/2
008
10/10/2
008
12/12/2
008
2/13/2
009
4/17/2
009
6/19/2
009
8/21/2
009
10/23/2
009
12/25/2
009
2/26/2
010
4/30/2
010
7/2/2
010
9/3/2
010
11/5/2
010
1/7/2
011
3/11/2
011
5/13/2
011
7/15/2
011
9/16/2
011
11/18/2
011
1/20/2
012
3/23/2
012
5/25/2
012
7/27/2
012
9/28/2
012
11/30/2
01270
75
80
85
90
95
$3.00
$4.00
$5.00
$6.00
$7.00
$8.00
$9.00
$10.00
$11.00
$12.00
$13.00
Wheat Price vs. The Value of the Dollar
Nearby Dollar Index Nearby Wheat Price
Fundamentals Still Matter
• Land Use
• Asian Demand
• International Production
• Alternatives Uses
CRP Contract Expirations
• Sept. 30 2009 2.8 million acreso Tx 561K, Colo 409K, Ks 331K, NDak 192,o SDak 184K, MT 138K
• Sept. 30, 2010 4.5 million acres
• Sept. 30 2011 4.4 million acres
• Sept. 30 2012 6.5 million acres
CRP OBJECTIVES• Upland Bird Habitat 250,000 acres• Bottomland hardwood trees 500,000 acres• Non-flood plain wetlands 250,000 acres• Flood plain wetlands 500,000 acres• Longleaf pine plantings 250,000 acres• Prairie pot hole duck habitat 100,000 acres• State acres for wildlife 500,000 acres
1983
1984
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
280,000
290,000
300,000
310,000
320,000
330,000
340,000
350,000
360,000
370,000
US Agricultural Acres
Planted Acres (1000 acres) Harvested Acres (1000 acres)
Thousa
nd A
cre
s
5/31
/200
5
8/9/
2005
10/1
8/20
05
12/2
7/20
05
3/7/
2006
5/16
/200
6
7/25
/200
6
10/3
/200
6
12/1
2/20
06
2/20
/200
7
5/1/
2007
7/10
/200
7
9/18
/200
7
11/2
7/20
07
2/5/
2008
4/15
/200
8
6/24
/200
8
9/2/
2008
11/1
1/20
08
1/20
/200
9
3/31
/200
9
6/9/
2009
8/18
/200
9
10/2
7/20
09
1/5/
2010
3/16
/201
0
5/25
/201
0
8/3/
2010
10/1
2/20
10
12/2
1/20
10
3/1/
2011
5/10
/201
1
7/19
/201
1
9/27
/201
1
12/6
/201
1$0.00
$2.00
$4.00
$6.00
$8.00
$10.00
$12.00
$14.00
July Wheat Futures Prices
1/3/2006
3/21/2006
6/6/2006
8/22/2006
11/7/2006
1/23/2007
4/10/2007
6/26/2007
9/11/2007
11/27/2007
2/12/2008
4/29/2008
7/15/2008
9/30/2008
12/16/2008
3/3/2009
5/19/2009
8/4/2009
10/20/2009
1/5/2010
3/23/2010
6/8/2010
8/24/2010
11/9/2010
1/25/2011
4/12/2011
6/28/2011
9/13/2011
11/29/2011
2/14/2012
5/1/2012
7/17/2012
10/2/2012
12/18/2012$0.00
$2.00
$4.00
$6.00
$8.00
$10.00
$12.00
$14.00
July Wheat Futures Prices
Series1
1/2/2
008
2/13/2
008
3/26/2
008
5/7/2
008
6/18/2
008
7/30/2
008
9/10/2
008
10/22/2
008
12/3/2
008
1/14/2
009
2/25/2
009
4/8/2
009
5/20/2
009
7/1/2
009
8/12/2
009
9/23/2
009
11/4/2
009
12/16/2
009
1/27/2
010
3/10/2
010
4/21/2
010
6/2/2
010
7/14/2
010
8/25/2
010
10/6/2
010
11/17/2
010
12/29/2
010
2/9/2
011
3/23/2
011
5/4/2
011
6/15/2
011
7/27/2
011
9/7/2
011
10/19/2
011
11/30/2
011
1/11/2
012
2/22/2
012
4/4/2
012
5/16/2
012
6/27/2
012
8/8/2
012
9/19/2
012
10/31/2
012
12/12/2
012$4.00
$5.00
$6.00
$7.00
$8.00
$9.00
$10.00
$11.00
$12.00
$13.00
July Wheat Futures Prices$/
bu
1/2/
2003
3/27
/200
3
6/19
/200
3
9/11
/200
3
12/4
/200
3
2/26
/200
4
5/20
/200
4
8/12
/200
4
11/4
/200
4
1/27
/200
5
4/21
/200
5
7/14
/200
5
10/6
/200
5
12/2
9/20
05
3/23
/200
6
6/15
/200
6
9/7/
2006
11/3
0/20
06
2/22
/200
7
5/17
/200
7
8/9/
2007
11/1
/200
7
1/24
/200
8
4/17
/200
8
7/10
/200
8
10/2
/200
8
12/2
5/20
08
3/19
/200
9
6/11
/200
9
9/3/
2009
11/2
6/20
09
2/18
/201
0
5/13
/201
0
8/5/
2010
10/2
8/20
10
1/20
/201
1
4/14
/201
1
7/7/
2011
9/29
/201
1
12/2
2/20
11$0.00
$2.00
$4.00
$6.00
$8.00
$10.00
$12.00
$14.00
White Wheat Cash PriceRitzville
White Wheat Cash Price
6/2/
2008
7/6/
2008
8/9/
2008
9/12
/200
8
10/1
6/20
08
11/1
9/20
08
12/2
3/20
08
1/26
/200
9
3/1/
2009
4/4/
2009
5/8/
2009
6/11
/200
9
7/15
/200
9
8/18
/200
9
9/21
/200
9
10/2
5/20
09
11/2
8/20
09
1/1/
2010
2/4/
2010
3/10
/201
0
4/13
/201
0
5/17
/201
0
6/20
/201
0
7/24
/201
0
8/27
/201
0
9/30
/201
0
11/3
/201
0
12/7
/201
0
1/10
/201
1
2/13
/201
1
3/19
/201
1
4/22
/201
1
5/26
/201
1
6/29
/201
1
8/2/
2011
9/5/
2011
10/9
/201
1
11/1
2/20
11
12/1
6/20
11
1/19
/201
2$3.00
$4.00
$5.00
$6.00
$7.00
$8.00
$9.00
White Wheat Cash PriceRitzville
White Wheat Cash Price
Highlights of USDA’s 2012/13 Supply and Demand Estimates
1. 2012/13 Global wheat production estimated at 654 MMT, down 6% from 2011/12
– Global supplies estimate at 850 MMT; 44.0 MMT lower than 2011/12
– Black Sea production declines to 78 MMT due to weather problems, compared to 115 MMT in 2011/12
– Canadian production estimated at 27.2 MMT, up 8% from five-year average
– US production rebounded 14% to 61.8 MMT2. Consumption to decline for first time in five years, down 4% from 2011/12
– World feed use expected to decline 10 percent to 132 MMT3. World wheat trade to fall 16% from 2011/12 to 132 MMT, below 5-year average of
138 MMT4. 2012/13 world ending stocks at 177 MMT, down 10% from 2011/12
– China’s ending stocks (56 MMT) account for 31% of total5. 2012/13 planted acreage higher than 2011/12
– U.S. wheat reached 55.7 million acres, up 3% from 2011/12– Winter wheat acres 3% greater at 41.8 million acres– Durum acres up 61% to 2.2 million acres after a sharp
decline in 2011/12– Spring wheat acres down 3% to 12.0 million acres
From: U.S. Wheat Associates
OUTLOOK• We have likely entered a sustained period
of higher average prices, coupled with increased volatility. Sources of volatility vary, and policy strategies to “control” volatility are at risk of causing, not solving, concerns related to market risk.
• Tensions between various use categories will result in considerable political pressure to manage who can and cannot engage in trade, especially in derivative and forward markets.
3/31/2
011
4/15/2
011
4/30/2
011
5/15/2
011
5/30/2
011
6/14/2
011
6/29/2
011
7/14/2
011
7/29/2
011
8/13/2
011
8/28/2
011
9/12/2
011
9/27/2
011
10/12/2
011
10/27/2
011
11/11/2
011
11/26/2
011
12/11/2
011
12/26/2
011
1/10/2
012
1/25/2
012
2/9/2
012
2/24/2
012
3/10/2
012
3/25/2
012
4/9/2
012
4/24/2
012
5/9/2
012
5/24/2
012
6/8/2
012
6/23/2
012
7/8/2
012
7/23/2
012
8/7/2
012
8/22/2
012
9/6/2
012
9/21/2
012
10/6/2
012
10/21/2
012
11/5/2
012
11/20/2
012
12/5/2
012
12/20/2
012
1/4/2
013$6.50
$7.00
$7.50
$8.00
$8.50
$9.00
$9.50
July 2013 Futures Prices
Hard Red Winter Soft Red Winter
6/1/2
012
6/7/2
012
6/13/2
012
6/19/2
012
6/25/2
012
7/1/2
012
7/7/2
012
7/13/2
012
7/19/2
012
7/25/2
012
7/31/2
012
8/6/2
012
8/12/2
012
8/18/2
012
8/24/2
012
8/30/2
012
9/5/2
012
9/11/2
012
9/17/2
012
9/23/2
012
9/29/2
012
10/5/2
012
10/11/2
012
10/17/2
012
10/23/2
012
10/29/2
012
11/4/2
012
11/10/2
012
11/16/2
012
11/22/2
012
11/28/2
012
12/4/2
012
12/10/2
012
12/16/2
012
12/22/2
012
12/28/2
012
1/3/2
013
1/9/2
013
1/15/2
013$6.50
$7.00
$7.50
$8.00
$8.50
$9.00
$9.50
July 2013 Futures Prices
Hard Red Winter Soft Red Winter
1/29/1
960
5/1/1
961
8/1/1
962
11/1/1
963
2/1/1
965
5/1/1
966
8/1/1
967
11/1/1
968
2/1/1
970
5/1/1
971
8/1/1
972
11/1/1
973
2/1/1
975
5/1/1
976
8/1/1
977
11/1/1
978
2/1/1
980
5/1/1
981
8/1/1
982
11/1/1
983
2/1/1
985
5/1/1
986
8/1/1
987
11/1/1
988
2/1/1
990
5/1/1
991
8/1/1
992
11/1/1
993
2/1/1
995
5/1/1
996
8/1/1
997
11/1/1
998
2/1/2
000
5/1/2
001
8/1/2
002
11/1/2
003
2/1/2
005
5/1/2
006
8/1/2
007
11/1/2
008
2/1/2
010
5/1/2
011
8/1/2
012$0.00
$2.00
$4.00
$6.00
$8.00
$10.00
$12.00
$14.00
$16.00
$18.00
Cash Grain Prices
Wheat Corn Soybeans
$/bu
ConclusionsWe have likely entered a new pricing regime relative to basic commodity prices.
Both price levels and price volatility will continue to exceed levels experienced through 2006/07.
We will likely see several proposed “solutions” to commodity price activity initiated through political institutions. This will be a global phenomenon, and many of the proposals will be short-sighted and off target.
Much of the political motivation for “managing” markets makes overly simplistic assumptions relative to causality.
Creative risk management becomes important
THANK YOU