Managing Margin Risk

An IP Video Conference

Managing margin risk has become incredibly important for producers given commodity price volatility and input cost increases.  While record profits are possible at these prices, producers must simultaneously manage price risk and input cost risk to maintain profitable margins.

The objective of this program is to provide producers with the tools to determine their breakeven prices, marketing plans, crop insurance decisions and leasing options with the end goal of being able to “lock in” profitable margins.

This program was offered during the winter of 2009.  All of the materials are available for self-study.  If you have any questions please contact, Corinne Alexander at cealexan@purdue.edu .

To view, Windows Media must be installed on the computer.

 

Session 1: A New Era of Margin Risk

  • What is margin risk?
  • What direction are input costs going? 
  • Breakeven analysis for farm enterprises
  • How do leasing arrangements affect my bottom line

Presentation slides l Readings l Assignment 1 l Cash Flow Workbook
Q&A l Streaming Video

 

Session 2: What Does the Farm Bill Mean to You?

  • Introduction to crop insurance
  • The Farm Bill offers new choices
    ACRE
    SURE
  • How does your crop insurance decision affect your ACRE decision

Presentation Slides l Streaming Video l Q&A

 

Session 3: Pricing Alternatives at the Local Buyer

  • Market volatility and dynamics
  • The importance of basis
  • Pricing alternatives at the elevator

Presentation Slides l Homework l Streaming Video l Q&A l Seasonality

 

Session 4: Crop Insurance and Marketing

  • How do crop insurance and marketing work together

Presentation Slides l Crop Insurance Changes Doc l Margin Risk Spreadsheet and Instructions (zipped) l Streaming Video l Q&A

 

Session 5: Putting it All Together in a Plan to Manage Margin Risk

  • How does my financial position affect my ability to take on margin risk?
  • What strategies should I consider

Presentation Slides l 2009 Purdue Crop Cost & Return Guide l Streaming Video l

 

Presenters

Corinne Alexander - Assistant professor at Purdue University serving as an Extension specialist in the area of grain marketing for both commodity and specialty markets.

Allan Gray – Professor at Purdue University serving as an Extension specialist in the area of farm policy.  Professor Gray’s areas of specialty include understanding how farm policy affects the family farm’s financial position.

Chris Hurt – Professor at Purdue University serving as an Extension specialist in the area of livestock and meat marketing. Professor Hurt's areas of specialty include examination of family farm market problems, pricing strategies, and livestock futures market problems.

George Patrick – Professor at Purdue University serving as an Extension specialist in the area of crop insurance. Professor Patrick’s area of specialty includes how to combine grain marketing and crop insurance strategies.

Luc Valentin – Assistant professor at Purdue University serving as an Extension specialist in the area of farm management.   Professor Valentin’s areas of specialty include leasing arrangements and efficient use of inputs.

 



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