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EDITOR’s 2 CENTS

By Staff | Dec 9, 2011

I’ve been playing the Iowa Commodity Challenge, a marketing education exercise through ISU and Iowa Farm Bureau Federation.

They’ve given us 50,000 fictitious corn bushels and 20,000 fictitious soybean bushels that have to be sold by Leap Day. They are fictitiously stored at West Central Co-op in Boone, with a 6-cent per bushel storage cost.

The object is to learn how to use all the marketing tools, which only costs us fictitious money. Of course, any profits are fictitious as well. So far, I’m not doing too well.

Advising and instructing the team is Ed Kordick, commodity services manager for Iowa Farm Bureau Federation. I can just imagine when he’s reading my e-mail inquiries, just shaking his head wondering how one guy could be so thick-headed.

My problem is trying to wrap my mind around put and call options. I’m beginning to understand how they work, but at what price level to buy them at, seems to be as much of a guess one pull from some nether region of one’s body.

I was telling this to staff writer Clayton Rye and he said, “If you can figure that out, you can quit newspapers. People will pay for that kind of information.” Last Wednesday I tried to contract corn for $5.80 and when the system asked me to confirm my trade, the computer kept giving me an error message.

I refreshed the page three times and tried to confirm the trade each time, and got the error message each time. I shut down the ‘puter in frustration and then wondered later if the transaction actually went through – all three times. So I drug myself out of bed, called up my account and … no, I still have 50,000 unsold bushels of fictitious corn. I’ve not made a move since. But later this afternoon, it’s Saturday, Dec. 3, I’m planning on making another attempt.

The coolest part of this exercise, aside from having a ‘puter that cooperates, is the chance to experiment with cash sales, forward contracting, buying options and seeing how all that works together, without spending actual money.

Someone asked me why I’m part of this challenge, since I write about market and outlooks. I said, “I’ve also been writing about agriculture for 30 years, but it doesn’t mean I can go out and farm successfully.”

Besides, other “players” includes ag lenders and bankers trying their hand at the challenge. If they think they need the experience, well, I’m in the right group.

I plan to keep my progress posted here, complete with what I’m trying to do, why I’m trying it and whether it works or not. Thank you Farm Bureau and ISU for this opportunity. I also appreciate Farm News which covered my $25 fee to participate.

Have a good week.

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