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Disclosure StatementPAST PERFORMANCE IS NOT INDICATIVE OF FUTURE
RESULTS. THERE IS SUBSTANTIAL RISK OF LOSS INVOLVED IN TRADING FUTURES AND OPTIONS WHICH MAY NOT BE SUITABLE
FOR EVERYONE. HOWEVER, THE RISK INVOLVED WITH PURCHASING OPTIONS IS LIMITED TO THE PREMIUM PAID PLUS
TRANSACTION COSTS. THIS MATERIAL HAS BEEN PREPARED BY A SALES OR TRADING EMPLOYEE OR AGENT OF AGWEST AND IS A
SOLICITATION FOR ENTERING INTO A DERIVATIVES TRANSACTION. THIS MATERIAL IS NOT A RESEARCH REPORT
PREPARED BY AGWEST. IF YOU ARE NOT AN EXPERIENCED USER OF THE DERIVATIVES MARKETS, CAPABLE OF MAKING
INDEPENDENT TRADING DECISIONS, THEN YOU SHOULD NOT RELY SOLELY ON THIS COMMUNICATION IN MAKING TRADING DECISIONS.
Excess Supply
U.S. Ending Stocks Global Ending Stocks
CORN: 2.48 Bil. Bu. 206.6 MMT(Largest in 30 years)
BEANS 470 Mil. Bu. 98.6 MMT(Largest in 11 years) (New Record)
WHEAT 989 Mil. Bu. 268 MMT(New Record)
Grain Sorghum
• Lower Yield in 2017
• Fewer Acres Planted in 2017
• Fewer Acres Harvested in 2017
• 72.1 BPA; Down 5.8BPA
• 5.63 Million Acres; Down 16 Percent
• 5.05 Million Acres;Down 18 Percent
China
Began importing Grain Sorghum aggressively in 2017
Basis levels in Nebraska improved during the growing season reflecting this demand lifting grain sorghum values over corn in many places
2018 Grain Sorghum
Drought conditions are prevalent across a wide section of the plains
Wheat crop condition ratings are very low
2018 Grain Sorghum
Basis levels are at historically good levels for 2018 new crop bids
Does NOT mean that basis levels have to narrow or widen
China is unpredictable.
2018 Grain Sorghum
Corn price is used to determine futures price of Grain Sorghum contract
Corn is burdened with largest stocks in 30 years
Corn price may be the most limiting factor in Sorghum pricing; Basis will do the rest
Producer tested since 2002
TOGETHER we design YOUR marketing plan, and then WE make it happen
NOT a Program!
Completely individualized
What We Will Cover
Cattle
Grains & oilseeds
It’s not getting any easier(Can we improve)
For those looking for help(We will send you home with a challenge)
Is the “10-year” cycle low in place?(pegged for 2016)
Final confirmation of low will come with a change in market trend
Cattle
Live CattleWeekly Continuation
Confirmation of uptrend whenlast spring’s high is breached
And both lows hold
1976
1985 1996
2006
2016
Live CattleWeekly Continuation
Each 10-year cycle has…**Higher lows
AND**Higher highs
2022 cycle high?
10-Year Cycle
Timing is here for years of good results
IMPORTANT -- This DOES NOT mean the cattle market goes straight up
Corrections during the upswing of the cycle do happen
Proactively Avoid the DipsWe can’t wait them out!
Live CattleWeekly Continuous
$15$25
$10$20
$20$15
2006 to 2014
Avoiding Pain During Corrections
Markets go up and then they go down
Opportunity comes and then it goes
We buy calves based on profits, why don’t we sell them that way also?
Striving for Consistency in Profitability
Key Drivers in ’18
South American productionFirst crop good but delayed and could push
second corn crop back7.8% in production
Lagging Exports
So far in the marketing year…
Corn exports are 25% behind last year compared to the USDA estimate of down 16% for the marketing year
Lagging Exports
So far in the marketing year…
Soybeans exports are 14% behind last year while USDA is estimating a 3% increase for the marketing year
Lagging Exports
So far in the marketing year…
Wheat exports are 8% behind last year with USDA estimating this marketing year to be down 5%
Key Drivers in ’18
South American production
U.S. weather
Exports
Funds (Where are they when we need them?)
Fund Position (As of January 9, 2018)
WHEAT – Short 146,000 contracts (Near record short)
SOYBEANS – Short 93,000 contracts(Short position growing quickly)
CORN – Short 222,000 contracts(Near record short)
U.S. DollarWeekly Continuation
101 Area
92 Area
Best guess – down -trending into up-trend support around the 87 area
3 Year Consolidation
Consolidation breakouttarget in the $83 area
Key Drivers in ’18
NAFTA -- the wild card in 2018
On January 11th, Trump told theWall Street Journal…
"I'm leaving it a little flexible because they have an election coming up. I understand a lot of things are hard to negotiate prior to anelection. However, if a fair deal is not found, Iwill terminate.”
Production Overcapacity
From 2000 to 2016
CORN:*Global acreage up 32%*Global yield per acre up 30%
SOYBEANS:*Global acreage up 69%*Global yield per acre up 24%
Acreage + Technology = Overcapacity
Recognizing The Problem
Production capacity is HUGE EXCESS supply globally
Small windows of time to make good things happen
U.S. producer has shown a tendency of…*Marketing complacency
AND*Kicking the can down the road
Questions For You…
What percent of producers market with a STRUCTURED PLAN?
Over 50%Less than 30%Less than 15%
Questions For You…
How much grain gets sold in the bottom 1/3 of the market each year?
• 20%• 40%• 60%• 80%
Source: Cargill
Congratulations
You have recognized the limitations of our markets
You are marketing witha structure
You have made the tough decisions
YOU ARE MARKETING BETTER THAN THE MASSES!
Is There Room To Improve?
We CANNOT improve the markets… they are what they are
BUT
We CAN improve how we go about marketing
What Makes Marketing So Difficult
SOLID DISCIPLINE is required
EMOTIONS can completely derail discipline
It is HUMAN NATURE – we all have emotions
EACH OF US, EVERY YEAR can work to improve our discipline and ability to keep emotions in check
What Makes Marketing So Difficult
Robert Plutchink’s theory – 8 basic emotionsHere are 5 of the 8
FEARANTICIPATIONJOYSURPRISEANGER
What Makes Marketing So Difficult
Robert Plutchink’s theory – 8 basic emotionsHere are 5 of the 8
FEAR of selling too soon – missing an opportunityANTICIPATION of better prices comingJOY when markets are moving higherSURPRISE when markets drop quickly ANGER when the markets have it all wrong
EMOTIONS screw up sound marketing!
When Emotions Take Over
At Times…Even The Best Marketers Second Guess Their Plans
Do any of these adjustments ring a bell?
Adjust sales targetsCancel sales targets -- (Cancel when close)Lift hedges before sales are made
When Emotions Take Over
Three of our TOP TEN Rules speak directly to keeping emotions in check
Rules #6 - #9 - #10
Keeping Emotions In Check
Marketing Rule #6
Discipline is necessary for successful marketing – emotionally driven decisions are often poor decisions
Keeping Emotions In CheckSteps for improvement…
Acknowledgement – the first and most important step
Accountability – ask your broker to be honest with you and call a spade a spade when you want to stray from the structure of your plan
Let others know you are working on improving in this area – spouse, partners and lenders
Keeping Emotions In Check
Recognize your emotional triggers…
Ahead of major reports?When weather forecasts turn ugly?When your backyard is suffering?When analysts on TV or radio start getting
bullish?When it seems like you’re the only one
selling anything?
Keeping Emotions In Check
Change the narrative -- both to yourself and to others
STOP SAYING
I’m the world’s worst at marketing I really messed that up I was asleep on the trigger I don’t know enough
*These are not Badges of Honor*
Keeping Emotions In Check
Change the narrative -- both to yourself and to others
START SAYING
I have a plan, and I will follow through I am a disciplined individual I can’t control the markets but can control how I
market
Keeping Emotions In Check
Marketing Rule #9
Every good plan includes contingency plans in case of a major market-changing event
Keeping Emotions In Check
Something will happen and market structures will change
***Could it be this year… ***Will it be 5 years from now…
Keeping Emotions In Check
Contingency Plans – “Tools to Use”
Deploy a “call” option strategy against sales above 50% of APH production
Remain open on 50% of your APH bushels
“Calls” provide confidence to keep selling
A replacement strategy can curb the fear of selling too much too early!
Keeping Emotions In Check
Contingency Plans
Purchase “calls” early while both price and volatility are low
Buy “call” option strategy on 25% of APH production spending 12 to 16 cents per bushel on corn
Worst case -- we beat up entire plan by 4 cents per bushel (CORN)
Keeping Emotions In Check
The primary concepts to step #9 are…
Be aware that market structure can change
Have a plan in place in the event of a change
AND THIS IS THE BIG ONE
Stick to your original plan as long as market structure has not changed – RELAX!
Keeping Emotions In Check
ALWAYS REMEMBER THIS…
Having to react to an upside breakout ofmarket structure IS A VERY GOOD THING…regardless of how much you have already sold
Keeping Emotions In Check
Marketing Rule #10
Perfection in marketing is undefinable and therefore unachievable— Marketing plan success should be gauged against individual goals rather than Chicago price action
Keeping Emotions In Check
Rule #10 is all about…
Staying focused on meeting YOUR goals
Understand that meeting goals represents a MAJOR WIN
CELEBRATE YOUR WINS!
SoybeansWeekly Continuation
If downtrend holds,we may have already seen the annual high…
Market Structure
2018 Soybean Risk And Hedge Directive
Potential price risk in 2018 = $8.44 futures(2015 low)
You currently own $10.00 November “puts” on all unsold production
2018 KC Wheat Risk And Hedge Directive
Potential price risk in 2018 = $3.90 futures(2015 low)
You should have order in place to buy…$5.20 September “puts” at 30 cents
on 40% of APH production
Corn – Weekly Continuation$4.50
$4.05
Market has compressedsince June 2016
$3.00
$1.05
Rallies get sold & Funds don’t buy big inventories
2018 Corn Risk And Hedge Directive
Be Cautious of Weather ScaresPotential price risk in 2018 = $3.00 futures
(Bottom of multi-year consolidation range)
You should have order in place to buy…$4.00 December “puts” at 25 cents
on all unpriced production
In The Current Structure –Earlier Is Better
CORN - December Futures Highs
Jan. through July Aug. through Dec. Diff.2017 $4.17 $3.89 $0.28 2016 $4.49 $3.59 $0.902015 $4.54 $4.02 $0.522014 $5.17 $3.89 $1.282013 $6.05 $5.08 $0.97
Average Difference $0.79
In The Current Structure –Earlier Is Better
SOYBEANS - November Futures Highs
Jan. through July Aug. through Nov. Diff.
2017 $10.47 $10.03 $0.442016 $11.86 $10.20 $1.662015 $10.45 $9.96 $0.492014 $12.79 $10.89 $1.902013 $13.50 $14.09 ($0.59)
Average Difference $0.78
2018 Sales Targets
Fundamentals and structure argue for more aggressive sales percentages at lower prices
Can we be more aggressive in 2018?
What tools can help you?
Look At The Whole Picture
Here is a sales example for those with farm storage and willing to hold until June 2019
Sell December futures @ $3.97Roll Dec. to July @ 28 cents +$0.28Less futures commissions -$0.02Net July futures = $4.23Basis target at 25 under July -$0.25
----------Net cash sale June 2019 delivery = $3.98
Questions For YOU!
Discuss with your spouse, partners and your lender…
What are your needs and wants?
How important is production marketing in getting these?
Enhancing relationships across 5 states
Customer relationships
Over 1,000 ag related professionals who receive our weekly market commentary
Trusted awareness thru a network of the right folks in ag
Structure of AgWest Land Brokers
Partners with George Clift, Amarillo TX
Jeff Moon is heading up the ALB initiative
Aggressively developing a network of AgWest Land agents
Why would you use AgWest Land Brokers?
Both buyers and sellers will benefit from the network of relationships
ALB will operate with the same ethical standards and integrity as we have from the beginning
Stay In Touch
Website – www.agwestland.com
Sign up for new listing alerts
Stay In Touch
Website – www.agwestland.com
Sign up for new listing alerts
Let your AgWest representative know your land needs
Keeping Emotions In Check
A major key to maintaining discipline is…
You made decisions based on market structure analysis
Example – ($3.00 to $4.50 corn range)
No need to adjust or change your plan UNTILor UNLESS corn trades outside of that range
Relax UNTIL the market proves something has changed!
Market Structures
Structures remain in place for long periods of time
It is what it is – UNTIL WHEN?(Until IT IS NOT)
Market structure drives decisions of a marketing plan
At this time, it appears we will be dealing with the same market structures in 2018
Questions For YOU!
Discuss with your spouse, partners and your lender…
Are you satisfied with your current marketing results?
What is your marketing philosophy… do you have a marketing philosophy?
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