🐗 Canadian Super Pig Invasion & Risk Management 101

Weekly Edition #11

Good Morning. Welcome to the Gravel Road - your weekly agri-news infotainment. Trust us to guide you through the South Dakota blizzard that is ag news…

Here’s what we have this week:

• 📈 Risk Management 101

• 🐗 Super Pigs

• 🌱 Planting Season Tips

• 🚜 Top Ten Tractors

WISDOM

Every morning when you blink your eyes open and roll out of bed, you are taking on some amount of risk. Even the most cautious and careful person lives with risk each day (and we’re not talking about the frustrating board game that’s been around since the ‘50’s).

You risk burning your hand on the stove while you make your over-easy eggs; you risk a fender bender as you drive to drop your kids off (it’s always the other drivers we’re worried about…); you risk your retirement in the stock market; your relationships, your reputation, your health, and the list goes on…

You get the idea.

Well, farmers and ranchers have market risk and that’s how you make a living in ag. I wanted to learn more about managing that risk, so I sought out an expert. I found a gentleman passionate about educating folks on what Risk Management is, and lucky you, he’s willing to share his knowledge with all of us.

Meet Devin Patton… he grew up on a commercial cow/calf operation in Oregon and now is a Series 3 Licensed Broker who also sells Livestock Risk Insurance. Living at the foot of the Wallowa Mountains with his wife and four kiddos, he’s passionate about educating the Ag community about Market Risk Management.

Here’s his thoughts:

The term Risk Management (RM) refers to market risk. First, you must understand that you carry market risk. Farmers are perpetually Long their crop market. RM is simply managing your Long position by making it smaller, or leaving it as large as it naturally is.

For crop marketing, the most simple choice is to make cash sales after your crop is harvested and stored. Or, you can be as complex as utilizing hedge-to-arrives (HTA’s) and Basis Contracts, hedging with Futures, or using Options on Futures.

Most farmers understand selling their physical crop to the elevator, so let’s learn about futures contracts.

A futures contract is a contract with specifications that is easily bought or sold via an exchange like the Chicago Board of Trade or the Chicago Mercantile Exchange. For example, a corn futures contract is for 5,000 bushels of Number 2 yellow corn. Each commodity futures contract has a specific quantity and quality grade for the par value.

Most futures contracts are deliverable, which means there are times where it might be advantageous for an owner of the commodity to deliver on their Short position. This is important to maintain a real tether between the futures prices and the price at which the physical commodities are trading.

Taking a Short position on a futures contract (short hedging) means you have gone from being Long your physical crop, to being Neutral the market.

The futures contract offsets any change in your physical crop value. If the market price falls, your hedge will profit, and your crop value will decrease. Likewise, if the market rises then your crop value will increase and be offset by losses on your futures hedge.

And there’s your first lesson on futures contracts being used for risk management.

Devin is ready and willing to answer any questions and further go down the rabbit trail with you. Shoot him an email here: [email protected]

Disclaimer

Trading futures and options involves substantial risk of loss and is not suitable for all investors. An investment in futures contracts involves a high degree of risk and is suitable only for persons who can assume the risk of loss in excess of their margin deposits. You should carefully consider whether futures trading is appropriate for you in light of your investment experience, trading objectives, financial resources, and other relevant circumstances. Past performance is not necessarily indicative of future results.

SEEDS

• 🍓 Indoor Farming: Vertical farming startup Plenty has secured “up to $1 billion” in investment proceeds to develop properties for indoor farming by commercial real estate trust Realty Income.

• 🐗 Hog Wild: Farmland owners in the northern US are at risk for Canadian ‘super pigs’ crossing the border and wreaking havoc on farm ground. These wild boars are a real threat which take a well-rounded prevention and extermination plan to deal with.

• 🥩 Fake Meat in the Red: Plant based meat (fake meat) companies Beyond Meat and Impossible Foods are realizing consumers want real meat. Their dismal sales and massive quarterly losses are proving that fake meat was just a fad.

• 🌽 Boost Yield: Here’s some management practices you might want to incorporate to maximize your corn yield potential.

• 🌱 Vertical Till: Equipment manufacturer Great Plains is partnering with Bayer to add options to their vertical tillage tools in an effort to support adoption of regenerative ag practices.

• 🫘 Planter Season: As spring approaches, here’s a handy checklist to make sure your planter is ready to roll.

THIS WEEK’S TOP TEN: Tractor Brands

Nothing is more emblematic of agriculture than the tractor. Hundreds of thousands of tractors are sold each year across the globe. From small utility tractors with single digit horsepower to massive four wheel drives pushing 600+ horsepower, these tools are essential to feeding the world.

Here’s the top ten most popular tractor brands in the world with estimated annual units sold:

1. Mahindra & Mahindra - 364,000

2. John Deere - 310,000

3. Kubota - 269,000

4. CNH Industrial (Case IH and New Holland) - 205,000

5. AGCO (Massey Ferguson, Fendt, and Valtra) - 163,000

6. Escorts Limited - 63,000

7. TAFE - 46,000

8. Same Deutz-Fahr - 42,000

9. Claas - 36,000

10. Yanmar - 31,000

MEME OF THE WEEK

That's a wrap, folks.

THANK YOU to everyone who works off the beaten path to feed our nation.

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