This document contains advice from Zenger Management on grain farming and marketing. It discusses the challenges farmers faced in the 1930s with low crop prices and expensive machinery. It provides Zenger's philosophy of basing decisions on reality, profitability and humility rather than fear, greed or pride. The document gives tips on creating a marketing plan and report to help make informed decisions on when and how to sell crops. It emphasizes merchandising grain like an elevator for added value and profitability.
3. Zenger Management
Nothing new under the sun . . .
“Everyone is having a hard time making ends meet.
Taxes are coming down, but not in line with what we
receive from our products. Automobiles, tractors,
radios, phones, and etc. are too much of a luxury for
15¢ corn and 25¢ wheat when these crops have to
be produced with machinery costing new as much as
it did in high prices for farm products.” Lyle Fraser
December 31, 1932, Morrowville, Kansas.
4. Zenger Management
Not a commodity broker
Not a grain merchant
Personal consultant
The Farmer’s
Advocate
6. Zenger Management
Philosophy
Don’t base decisions on
fear, greed or pride. Don’t
listen to radio jocks, snake
oil brokers, coffee shop
gossips, or grain merchants.
They have ulterior motives—
many will intentionally lie.
7. Zenger Management
Philosophy
Do base decisions on reality,
profitability, and humility. Do
respect family and business
responsibilities. Do consider
seasonals, technicals,
fundamentals, and your
commonsense.
20. Zenger Management
Global grain stocks-to-use
flat despite record
production. Consumption
is increasing due to rising
standards of living and
because grain is “cheap”.
37. Zenger Management
Create a personal
marketing plan. Create it
during the winter when
there is time to think and
emotions are low. Decide
ahead how much to sell to
who, to deliver when, and
with what kind of contract.
38. Zenger Management
NEW CROP MARKET PLAN for CORN 2016/17 Client: Farmer J. Example Draft #1 Date: 2-Mar-16
0 FSA Total Per Acre
Planted Acres (your share) 1500.0 A Cash Flow Breakeven Price: $3.75
Projected Yield 173 Bu Policy RP2 Unit Crop Breakeven Revenue : $975,000 $650
Total Production Anticipated 260,000 Bu Coverage Rate 75% Cash Revenue Goal: $1,105,000 $737
Farm Storage Available 175,000 Bu APH 173 Cash Revenue Goal Price: $4.25
% to Farm Store 67% Guaranteed Bu. 194,625 Acres Yield Share Production
"Must Sell" Bushels 85,000 Bu Base Price $3.85 Irrigated 1,000.0 200.0 100% 200,000
% to Hedge or Contract Guaranteed Reven $749,306 Irrigated 0.0 0.0 100% 0
% to Protect w/ Call Options Hail Insurance Dry 500.0 120.0 100% 60,000
% to Protect w/ Put Options Share Bu.: 260,000 Share Acres: 1,500.0 Dry 0.0 0.0 100% 0
Total Bu.: 260,000 Total Acres: 1,500.0 Dry 0.0 0.0 100% 0
Time Period Location % Bushels Contract Coverage Dec. T arget
1. February-March Farmer's Coop 10% 25,000 Har del 10% $4.10
2. March Crete Mills 10% 25,000 Har hta 19%
3. April Adams Ethanol 10% 25,000 Har hta 29%
4. May CBOT 10% 25,000 Put/Call spd 38%
5. June CBOT 10% 25,000 Dec hedge 48%
6. June-July CBOT 10% 25,000 Dec hedge 58%
7. When the market 19% 50,000 Dec Puts 77% $4.30
8. rallies 19% 50,000 Dec Puts 96%
Not pre-sold: 110,000 58% 150,000 96% 250,000
Date Offered Contracts Strike Month Premium
Futures
Floor
A. 10 $4.00 Dec ($0.20) $3.80
B. 10 $4.20 Dec ($0.20) $4.00
C.
D.
E.
F.
G.
H.
New Crop Marketing Plan Market Notes
Tool
Complete at $4.10 or in March. If spec funds cover shorts--probably price 30% to 40%
Be 20% covered by March 31--but if specs cover shorts in March, move to 30% to 50% covered.
Be 30% covered by April 30--but if specs cover shorts in April, move to 40% to 50% covered.
Be 40% covered by May 30--but if specs cover shorts in May, move to 50% covered.
Be 50% covered by June 30
Options / Futures Offered
Add another 10% to be 60% covered if the market offers an opportunity.
Cover 20% with December Put options if the created floor price is at or above breakeven.
Cover another 20% with Dec Put options if the market continues to move higher.
Suggest not selling below $3.80 December--at least not for now.
Buy Put Option
Buy Put Option
The information contained in thisplan istaken from sources, which we believe to be reliable, but itisnot guaranteed by us as to
accuracy or completenessand issent to you for your informational purpose only. Market strategiesare based upon price
assumptionsthat are not predictable or guaranteed. Zenger Farm & Land Management, Inc. basesitsrecommendationssolely on the
judgment of Zenger Farm & Land Management, Inc. personnel.
Harvest delivery basis: Farmer's Coop -40c; Crete Mills -30c; Adams
Ethanol -25c.
Notes:
Questions:
39. Zenger Management
Create a personal
marketing report.
Understand the true result
of actions. See the big
picture. Current position
important to present
decision. Learn value of
incremental and seasonal
selling and merchandizing.
40. Zenger Management2016 Marketing Report Corn Client: Farmer J. Example
ADM Hutchin
Crop Insurance: Cash Price x $3.23
APH: New Crop $3.46
Est. Production: Coverage Rate: Deferred Bid $3.42 July 2016 - 20c
Crop Revenue Goal: Base Price:
Cash Flow Price Obj.: Payment/Acre:
Breakeven Revenue: Bus. Sold/Acre
Date Sold Bushels Location Contract Price Disc/basis Hedge Net Price Receipts
1. 3/15/2015 25,000 Farmer's C Har del $3.70 $3.70 $92,500 Location Bushels
2. 3/25/2015 25,000 Crete Mills Har hta $4.20 ($0.15) $4.05 $101,250 Farm storage 185,000
3. 4/20/2015 25,000 Adams Eth Har hta $4.25 ($0.10) $4.15 $103,750 Feedlot (30,000)
4. 3/1/2016 25,000 ADM Cash $3.54 ($0.05) $0.49 $3.98 $99,500 ADM Hutchin (25,000)
5. 3/1/2016 25,000 Feedlot Cash $3.54 $0.10 $0.71 $4.35 $108,688 Feedlot (25,000)
6. 25,000 $3.23 $0.82 $4.05 $101,225 Sale 0
7. 1/10/2016 30,000 Feedlot Cash $3.85 $3.85 $115,500 Sale 0
8. sale 0
9. Sale 0
10. Sale 0
11. Balance 105,000
12. Location 2 0
13. sale 0
14. Sale 0
15. Sale 0
16. Balance 0
17. Location 3 0
18. sale 0
19. Sale 0
20. Sale 0
21. Balance 0
22. Location 4 0
23. Sale 0
24. Sale 0
25. Sale 0
26. Balance 0
27. Beginning Balance 185,000
28. Ending Balance 105,000
29.
T otal bu. 180,000 $4.01 722,413
Date Contracts Strike M onth T ool Cost Status Received Receipts Per Bushel
A. 5/10/2015 5 $4.00 Dec-15 Put ($0.200) 10/15/2015 $0.380 $4,500 $0.180 $12,250
B. 5/10/2015 5 $4.90 Dec-15 Call $0.150 7/1/2015 ($0.040) $2,750 $0.110
C. 10/15/2015 5 Mar-16 Hedge $3.750 3/1/2016 ($3.550) $5,000 $0.200
D. 6/11/2015 5 Dec-15 $4.180 10/16/2015 ($3.763) $10,438 $0.418 $17,688
E. 7/7/2015 5 Dec-15 $4.278 10/16/2015 ($3.763) $12,875 $0.515 $20,375
F. 10/16/2015 5 Mar-16 $3.830 3/1/2016 ($3.540) $7,250 $0.290
G. 10/16/2015 5 Mar-16 $3.830 3/1/2016 ($3.540) $7,250 $0.290 % Sold
H. 3/1/2016 5 Jul-16 $3.610 Open ($3.600) $250 $0.010 69%
I.
J. Price Needed
K. on Balance
L. $4.78
M.
N. Today's
O. Crop Value:
P. Per bushel
Q. $3.77
R. Goal/Acre
40 Comm ($45) $48,513 $737
Value/Acre
$654
Difference
($83)
$4.17
$3.77
Grain Inventory
120
$0.00
RP2 Unit
173
260,000
$4.25
3/1/16
3/1/16
1/10/16
$975,000
75%
$3.85
Date
Planted Acres:
Projected Yield:
$1,105,000
1,500
173
$0
Average price -->
Bushels Priced
Bushels Left to
Price
Revenue
Goal
Today's
Value Revenue to Protect
180,000 80,000 $981,133$1,105,000
2016 Corn:
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Total Bushels Bu. Priced Bu. Left to Price
260,000 180,000 80,000
Today's Value Ave. Price Price Needed
$3.77 $4.01 $4.78
Goal/Acre Value/Acre Difference/Acre
$737 $654 ($83)
69
%
31
%
Yellow Corn
Bushels Priced
Bu. Priced
$981,133
$722,413 $749,306
Revenue
goal
$1,105,000Breakeven
Revenue
$975,000
$0
$200,000
$400,000
$600,000
$800,000
$1,000,000
$1,200,000
Today's value Sales to Date Crop Insurance
Focus on revenue, not
price. Production usually
impacts total crop
revenue more than price.
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Pricing grain involves two
decisions . . . “when” and “how”.
The “how” can increase
profitability with limited risk.
Gain a competitive advantage
because most productions do not
“merchandize” their grain.
Administrative, not speculative.
Merchandizing Grain
50. Zenger Management
Emotions are powerful, they are hard to control, and they
often lead to poor decisions. Many grain marketing
decisions are based on fear or greed—and not on logic,
reason, or strategy. Greed comes in several colors. Greed
causes us to hold high priced grain too long. Greed also
causes us to stew about earlier sales. Greed entices us to
risk more money on efforts to "make it back". To make
good decisions in volatile times you need a purpose that is
stronger than the emotion. The desire to protect your
family from financial stress should be great enough to
overpower the temptation to speculate. Purposing to
create a peaceful and secure atmosphere in the home—
versus one of tension and conflict—will help you stop
rehearsing the unchangeable past in your mind.
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You will keep in perfect peace
him whose mind is steadfast,
because he trusts in You.
Trust in the LORD forever,
for the LORD, the LORD, is the
Rock eternal.
Isaiah 26:3-4
