Wade Johannes. Commodity Risk Manager ProEdge Marketing Central Valley Ag

Transcription

1 Wade Johannes Commodity Risk Manager ProEdge Marketing Central Valley Ag

2 Farm and cattle feedlot Columbus, NE Graduated from UNL May 1999 Johannes Farms, Inc 1999 to 2005 Cargill in Albion, NE 2005 to 2009 Central Valley Ag 2009 to present

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4 Central Valley Ag

5 Agronomy Grain Feed Fuel

6 The full-service marketing division of CVA s Grain Department

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9 Why isn t it?

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12 Increased revenue Increased profits More opportunities Increased input prices Increased volatility Handle more money More Risk

13 The Business Approach to Marketing

14 The Seven Pillars for Successful Marketing

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16 Know your investment Do you know what makes you money? Everyone s breakeven is different Moving parts Before harvest project an average yield Refigure after harvest when bushels are known The more time and information you put in, the more you will get out Reevaluate at least each quarter

17 <10% do this on their own I never had to do that before. Why should I do it now? Answer: Higher Prices = Greater Risk What Got You Here, Won t Get You There Marshall Goldsmith Grocery Store Example

18 The Goal is Profitability (not bragging rights)

19 This is the way everyone talks! The Board of Trade That s the way we have learned to market grain! Everyone WANTS to feel like the winner!!

20 Sales pay for your investment Measure sales against the cost of your investment Net Profitability

21 Different Approaches Different Mindset

22 Should I sell today or tomorrow? You either feel great or you feel like a failure Full of regrets and what if s Reduces emotion More consistent returns Healthier way of looking at sales

23 Buy Fertilizer, Sell Grain If you buy $50,000 of fertilizer Sell 10,000 bushels of corn Lock in inputs, sell outputs Cash rent Diesel fuel Herbicide Insecticide

24 You have now hedged your input purchases with sales When you are done paying for inputs, you should have 10-50% left to market Even if you are wrong, you have paid for expenses THIS REMOVES A LOT OF STRESS!!

25 Less Stress, Better Decisions

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27 Percentages Stay the Same

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29 Be sure to account for these changes! Rotation Irrigated or dryland? Buying a farm Gaining/losing rented ground Making room for the next generation

30 Farmer A 100,000 bu Farmer B 1,000,000 bu Farmer C 15,000 bu 10% 1% 66%

31 Making Decisions

32 5% increments

33 20% increments

34 10% increments Start here if you are unsure

35 It s easy to fall in love with bushels It s tough to fall in love with percentages! Risk Management talk in percentages

36 Big difference in how they are used

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38 In the heat of the moment Cash sales Do I sell today or tomorrow? More emotion Sell orders Options strategies Floored contracts Averaging contracts Less emotion

39 Less emotion Rational decision for the right reasons Throw it out there and let the market work It can be triggered even when you are not watching the markets!

40 We recommend a combination of both Will it pay to have upside this year? We won t know until it is done! Diversify!! If you are not sure, use a Target

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42 What is a realistic price? When will this happen (what time of year)? How many bushels will we sell at $? When do we need to move grain? Cash flow Logistics Grain quality When will we move to Plan B? This target is no longer realistic

43 Be Aware of the Time of Year Avoid Big Round Numbers

44 High $7.89 on 8/29-30/12

45 High $5.97 on 1/3/12

46 Open up Communication - Get team members on the same page

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48 Sell a similar percentage ahead of harvest Every Year If 50% is normal, stick with that 40-60% Avoid 80% one year 0% the next

49 30% in 09 70% in 10 20% in 11 80% in 08

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51 Big swings in percent sold result in additional stress Even if it is the right thing to do, is it worth it? Do not guess if this is a good year to sell ahead

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53 ProEdge portfolio approach Timing Types of Contracts Spread out your risk Don t put all of your eggs in one basket This is easier said than done Especially in hindsight! 401K

54 Johannes Farms Floored Average Min/Max Triplex Triplex Offer HTA Bonus Premium Unsold

55 We Want to Sell 100% at the HIGH!! Is that realistic? How often can you do this? What will happen if you swing and miss?

56 Should I sell before or after the USDA report?

57 Issue you want to be RIGHT Inbound calls three days prior to a report Increase ~ 5x What s the report going to say? You might be right on 90% of the numbers in a single report That last 10% might be the difference in the direction of the market ANSWER: No one knows Moral Do Not Try to Outguess the USDA

58 Take the bushel amount you want to sell Split it in half Sell half before and half after the report This will Average Out the impact of the USDA report on your farm operation

59 Will Upside Potential pay off???

60 Split the decision in half

61 But it can be expensive

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63 If you are 60% sold You have upside on the 40% that is unsold You also have 40% that is at RISK

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65 Do not get hung up on one sale Good Sale Bad Sale The overall AVERAGE is what pays the bills

66 Good Sale Sell 10,000 bu at the high of the year You re so proud of hitting the high that you don t market the other 40,000 bu that is unsold Bad Sale Sell 10,000 bu early Price goes up You won t forgive yourself for making that sale Build pressure to hit the high with everything else

67 It s the total revenue generated that counts 10,000 $5.50 = $55,000 10,000 $6.00 = $60,000 10,000 $6.12 = $61,200 10,000 $7.54 = $75,400 40,000 bu total = $251,600 Average of $6.29/bu on 40,000 bushels

68 Increased Opportunities Increased Risk

69 Know your investment (breakeven) Make decisions based on net profitability rather than $/bushel Sell in percentages Targets vs. In-Season Sales Be consistent Diversify Think Big Picture!

70 Is this how you market?

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72 Doing what worked Last Year Selling the wrong amount Worrying about things out of your control If only Trying to fix lower sales Upside either: Opens up the downside Costs money

73 Swinging for the Fence Las Vegas is in Nevada. Your farm isn t. Worrying about what your neighbor is doing Doing something you don t fully understand Poor communication

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75 Consider the ProEdge Approach!

76 Thank You! or on Linkedin.com