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2009
Risk
and Profit Conference
August 20-21, 2009
August 20-21, 2009
K-State Alumni Center
Manhattan, Kansas
Manhattan, Kansas
Breakout Sessions
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Registrants may attend 7 of the 20 sessions listed below. Please note (by number) which sessions you plan to attend on your registration form. |
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1. The
Post-recession Economic Landscape for Food and Agriculture: Maintaining
Our Competitiveness Mike Woolverton & Dan O’Brien |
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2. Macroeconomic Theories that Rule the World Vincent Amanor-Boadu A few major theories rule national and international economies and the lenses through which policymakers view economic problems define the theories dominating their policies. Increasing globalization ensures that no country and its citizens are protected from the dominant theories in operation in any other major country. This paper provides an overview of the major macroeconomic theories competing for attention and argues that business leaders have to develop sound appreciation of their effects and develop coherent strategies to minimize any adverse effects or maximize any beneficial effects they may present. |
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3. Optimal Level of Crop Insurance Combined with SURE and ACRE Art Barnaby With the declining prices the question remains, why so little interest in ACRE? This session will explore the historical payouts that ACRE would have generated in addition to the most current year. For the current year, continuing to update prices and yield forecasts will ultimately determine the 2009 ACRE payment. In addition, the SURE program implementation rules are not expected until December. However, this will be the third wheat crop covered under SURE without knowing the SURE rules. Depending on the implementation rules, optimal levels of crop insurance could easily change. |
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4. Why Producers Should Consider Managing Supply Chain Risk Michael Boland Professor Boland will present an overview of drivers of change in the retail agronomy and grain origination industries in Great Plains, present data to show estimated farm income over fertilizer costs for past five years for different cropping systems, and discuss new risk management programs that several ag retailers are developing that would allow a producer to price their inputs and sell their grain simultaneously to help a producer manage supply chain risk. |
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5. Interest Rates Joe Arata This informal presentation will start with a definition of the U.S. money supply, look at the equation of exchange and the alphabet soup of Federal Reserve Bank programs that were and are supposed to improve US financial markets function and credit market access. We will talk about money velocity, interest rates and inflation. During the presentation we will review all those things that we should have learned in macro economics but didn’t. |
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6. Now You See It, Now
You Don’t: Why Packer Market Power is So Elusive John Crespi, Tian Xia, & Rodney Jones Cattle production follows a dynamic cycle and cattle markets receive much scrutiny because of the potential for packer market power. The relationship between the two has been little studied, however. This paper provides a simple conceptual framework to study how the cattle cycle and buyer market power jointly affect the bargaining position between producers and packers. A larger cattle stock leads to a lower fed cattle price when beef packers have market power in cattle procurement. This is intuitive, but what is not obvious is the feedback effect on the cycle itself. The authors find that the cattle stock’s negative effect on price is magnified by the degree of buyer market power in cattle procurement but that over the cycle, the effects can be short-lived. Empirical findings support the posited theoretical relationships. The research is important to help understand why research into market power in cattle procurement can give such varied results. |
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7. Flexible Cash Rents -- Why and How? Kevin Dhuyvetter and Terry Kastens Crop share leasing arrangements have historically been the dominant lease type in Kansas, however, the trend is towards more cash rent leases. While there can be good reasons to consider a cash lease, the recent volatility in commodity markets has made it very difficult to establish a fixed cash rent that is “fair” to all parties. FSA recently ruled that bonuses and flexible cash leases would be treated as cash rents thus making it easier for producers and landowners to consider some type of variable cash rent arrangement. Unfortunately, there is not a “right answer” as to how flexible cash leases should be defined. This session will discuss leases in general, compare alternative leasing arrangements, and provide examples of how a flexible cash lease might be designed and implemented. |
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8. The Impact of Kansas Grain Industry Structure on Corn and Wheat Bids Dan O’Brien The corn and wheat cash prices in Kansas are affected by a number of local supply-demand, market structure, transportation access and other factors. Kansas corn prices in 2008 were affected by form of business organization, local feedgrain production and livestock feed usage, elevator storage capacity, access to railroad grain handling facilities, and to a limited degree by the number of competitors in local markets. During 2008 geographic proximity to grain ethanol plants did not have a positive statistically significant impact on local corn prices, although a number of mitigating factors may have existed during that time period. Kansas wheat prices in 2008 were affected by local wheat production, elevator storage capacity, the number of competitors in local markets, and by location relative to flour mills in the state. Evidence of operating cost and efficiency differences among grain elevators indicate the presence of market power in local Kansas grain markets. A disparity exists in the size of grain storage and handling facilities and rail car capacities among grain elevators in Kansas. A small number of larger capacity grain elevator facilities exist throughout the state along with a large number of medium to small facilities. There is also a marked disparity among geographic crop reporting districts in Kansas in terms of grain production, grain elevator capacity, and associated rail car handling capacity. A large number of multiple location agribusiness firms exist in Kansas. These multiple location firms are mostly Cooperatives operating in regional markets, but there are also a limited number of major Independent and Joint Venture multi-location firms in the state. A small number of multiple site Independent firms exist that have large grain handling and rail capacity which are widely dispersed across the state. Competitive market conditions in local/regional grain markets in Kansas tend to be affected by the existence and location of shuttle and/or unit train grain handling facilities and major grain terminals. Delineation of rail procurement areas offers an “upstream – downstream” perspective of grain markets and grain market flows in regions that depend on rail transportation to move grain from producing areas to exporters, processors and/or livestock feeders. Truck transport of grain is a major factor in movement of grain and feed products over all distances less than what is economically serviceable via rail. |
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9. Country Of Origin Labeling Alex Saak Until recently voluntary country-of-origin labeling of food products was relatively uncommon in the U.S. The mandatory country of origin labeling (MCOOL) regulation, which went into effect in 2009, requires food retailers to notify their customers of the country of origin of various agricultural products. In this presentation, we discuss several approaches to evaluating the impact of the MCOOL policy on welfare. We consider the economic implications of MCOOL in markets in which product origin provides an important cue to consumers who have different rankings of products from different countries as well as in markets in which product origin serves as a signal of quality to all consumers. |
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10. Strategically Speaking...: The Increasing Need for Strategic
Thinking in Farm Businesses Vincent Amanor-Boadu With change happening at an ever increasing rate and engendering uncertainty of outcomes and usefulness of strategies, it is becoming increasingly necessary for agricultural producers to do the unthinkable and enhance the level of strategic thinking they do about their businesses. This paper defines strategic thinking and makes the case for producers to incorporate it into their habits in order to effectively manage the current and emerging marketplace uncertainties. The paper suggests that an important aspect of strategic thinking is an appreciation of alternative futures and an assessment of the potential of these futures on the competitiveness of the business through simulation and thought experiments. The paper provides a step-by-step process for developing the habit of strategic thinking with the singular view of enhancing the farm business’ competitive advantage. |
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11. A Risk Analysis of Converting CRP Acres to a Wheat-Sorghum-Fallow Rotation
in Western Kansas Rich Llewelyn & Jeff Williams This study examines the economic potential of producing a wheat-grain sorghum-fallow rotation with three different tillage strategies (conventional, reduced, and no-tillage) compared to the Conservation Reserve Program (CRP) in western Kansas. Yields, input rates, and field operations from an experimental field at Tribune, KS are used to calculate net returns for each tillage strategy and the preferred management strategies are determined for various risk preferences. Although net returns to crop production using reduced tillage and no-tillage strategies with average crop prices for 2007-2008 are higher than CRP payments, risk analysis indicates CRP would be the preferred strategy for more risk-averse managers. When average crop prices for 2006-2008 are used, CRP payments are higher than returns from crop production. Based on this analysis, only those individuals who are risk-neutral or slightly risk-averse would prefer crop production to continue CRP enrollment in this region unless commodity prices reach the historically high levels of late 2007 and early 2008 and remain there. |
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12. Commodity Swaps Orlen Grunewald Commodity markets have experienced unprecedented volatility in recent years, exposing grain producers, elevators and agribusinesses to large swings in grain prices. Swaps are widely used as over-the-counter agreements between buyers and sellers of corn, wheat and soybeans. Grain swaps are popular because the terms of trade can be tailored to meet the needs of buyers for fixed pricing of grain supplies by establishing a forward price on a cash-settled basis. This means that buyers and sellers can settle the difference between the swap price and the market price at delivery through the CME Group Commodity Exchange and then sell or buy grain through the local cash market. Swaps act as a hedge for the risks of sharp price swings. The CME Group Commodity Exchange acts as a clearing house for the transaction to eliminate counter-party risk of default on the contract. Swaps extend the application of fixed forward pricing to the grain markets while permitting the parties in the transaction to determine the price, quality, quantity and delivery specifications in a private contract. |
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13. Dry Land Farming Risk and Profit: How are They Affected by Tillage and
Opportunity Cropping in Western Kansas? Ray Smith, Robert Burton, Jr., & Alan Schlegel For a dry land case farm located in Greeley County, Kansas, risk and profit are determined for reduced-till and no-till rotations with and without opportunity cropping. Profit is defined as gross revenues minus variable costs during the 10-year study period. Because farmers are not adverse to high income years, risk is defined as the number of annual losses out of 10 and the average of the three lowest income years. Opportunity cropping involves planting a potentially more profitable crop when rainfall is adequate and using more fallow when rainfall is inadequate. Results indicate that the no-till rotation with opportunity cropping is most profitable; but the reduced-till rotation without opportunity cropping is least risky. |
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14. Relative Efficiency of Kansas Wheat Farms Michael Langemeier This presentation will document changes in wheat acreage in Kansas over the last 35 years, will compare trends in wheat yields to trends in feed grain yields, and will examine the technical and cost efficiency of farms with particular emphasis on how this efficiency relates to the proportion of farm income derived from wheat. Differences in wheat enterprise profitability and the importance of economies of size will also be discussed. |
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15. Getting the Job Done: Employee Wage Rates and Compensation Packages on Kansas Farms Kevin Herbel & Kiel Roehl What do you think of when someone mentions employees on the farm? Waste of time, pain in the neck, or can’t do without them? Labor management is becoming increasingly important on Kansas farms. Attracting and retaining quality employees presents unique challenges that are difficult for many of us. This session will look at preliminary data from a Kansas Farm Management Association survey examining wage and benefit packages on Kansas farms and comparing this data to a similar survey completed in 2001. What does it take to recruit and retain employees? What are other farm managers doing? Should family and non-family employees be compensated differently? What can be done to improve working relationships on the farm? |
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16. Productivity Convergence Across Kansas Farms Beth Yeager & Michael Langemeier This presentation will document changes in productivity across Kansas farms over the last 30 years. The Malmquist productivity index is used to estimate the productivity changes for each farm every year and to determine if farms are “catching-up” to the same levels of productivity as the top farms in the study. Differences among these farms in terms of size, sources of income, productivity indices, and financial ratios will be discussed. |
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17. Management Strategies Affecting Calf Marketability Lee Schulz & Kevin Dhuyvetter Information related to factors that influence the price of feeder cattle and calves is valuable to producers selling feeder cattle to help them make informed management and marketing decisions. Likewise, feeder cattle buyers need to understand value differences associated with various physical and marketing characteristics as they make purchasing decisions. Furthermore, it is important to understand how these price effects change with time. Accordingly, market participants are wary of relying upon dated pricing information when making management, marketing, and purchasing decisions. Results indicate that cattle producers can improve the prices they receive for feeder cattle by closely monitoring a number of management practices prior to the sale date. |
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18. Is Conservation Tillage Conserving Dollars In Your Pocket?: A Deeper Look at No-Till on the Plains Jason Bergtold & Sam Funk Conservation cropping systems offer a lot of advantages, including improvements in soil productivity, cash crop yield gains, lower production costs, reductions in soil erosion and off-site environmental impacts. A key factor in the realization of these benefits is management. While on individual crop basis, no-tillage cropping systems in Kansas have shown to be profitable, an examination of farm efficiency and its relation to alternative farm inputs (e.g. machinery, labor, land) has not been examined in depth. The purpose of this presentation is to delve into the efficiency and management of no-till cropping systems in Kansas, with specific focus on the North Central Kansas Farm Management Association (KFMA) district. We examine a snap-shot of a set of conventional tillage and no tillage farms and try to determine efficiency gains from no-till adoption. Furthermore, how the use of no-tillage impacts efficient input usage on-farm is examined. This research is a part of a larger project trying to examine the impact of no-till across the state of Kansas at the farm level over time. Preliminary data from a no-tillage survey of KFMA farmers has been collected for use in this analysis is presented. |
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19.
Managing Risk Using
AgManager.info Rich Llewelyn The Internet is an excellent way to obtain needed information. However, rapid changes in technology, the abundant and varied information available, as well as the increased mobility and interactivity allowed by the Internet can create challenges and difficulties in efficiently accessing and using the information on the web. Though not comprehensive, this presentation notes some of the current trends in Internet usage and seeks to help users to make more effective use of the Internet. The AgManager.info website is introduced and used as an example of some of the issues discussed. |
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20. The Obesity Epidemic--What it means for Agriculture Bryan Schurle & Troy Dumler Many people have concluded that there is a major obesity problem in the United States. Some people have also suggested that agricultural policy is one of the causes of obesity. This paper looks at issues associated with obesity including how it is measured for individuals, how prevalent it is in the country, how it has changed over time and what some have suggested are causes of obesity. In addition, agricultural policies are reviewed and connections to the obesity problem explored along with potential implications for U.S. agricultural producers. |
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