谆潒敢瑲瑮汤-MarketingAlternativesToManage.pptVIP

Marketing Overview Marketing is a complex activity with many alternatives No single “best” or “recommended” strategy fits all growers, or even one grower from year to year Objective: find alternative that has highest net return reduces income variability acceptable level of risk Criteria for Evaluating Marketing Alternatives Availability Cost Complexity Level of risk Type of risk Net selling price Market outlook Financial situation Constraints Cash Market Based Marketing Alternatives Grain is delivered and sold for cash at harvest in a convenient market Cash Market Based Marketing Alternatives Grain is placed in on-farm or commercial storage and sold at a later time determined by the grower Cash Market Based Marketing Alternatives Cash Market Based Marketing Alternatives Prior to harvest, grower signs a contract to deliver a fixed quantity grade of grain at a specified price, and at a specified location Grain is delivered to a commercial elevator and sold by a specified date at a price to be determined in the future Price is tied to local posted bid or a terminal market bid Grain is delivered to a commercial elevator and sold prior to a designated date at a specified amount above or below a futures price (or basis) Actual or expected cash market position is offset by selling appropriate amount of futures contracts Futures contracts are “bought back” when grain is sold on cash market Net price received is a combination of the cash market futures transactions Advantages: + Extends pricing decision window + Risk of adverse price change is eliminated + Easy to reverse position (liquidity) + Basis is more predictable than price Disadvantages: - Risk of adverse basis change - Margin requirements increase interest costs may cause cash flow problems - Contracts only in fixed increments - Requires knowledge of futures basis - Eliminates gain from rising cash price A put option(s) that allows the holder to take a futures position is purchased for the a