PROMOTIONAL MATERIALS

An Introduction to Commodity Challenge for Game Leaders

This powerpoint presentation is used to introduce potential game leaders to Commodity Challenge, and provide them with tips for using the game in marketing education.

Advertisement for Commodity Challenge as it appears in Corn & Soybean Digest

This advertisement is running in Corn & Soybean Digest to recognize sponsors and to encourage play.

www.commoditychallenge.com

This is the url for Commodity Challenge.

Newspaper article

This article talks about a group in South Dakota using Commodity Challenge to learn about grain marketing strategies and tools.

EDUCATIONAL MATERIALS

Chapter 1: Introduction to Commodity Challenge

Edward Usset
The Center for Farm Financial Management

In this introduction to Commodity Challenge, the reader learns how to register for Commodity Challenge and join an open game. The challenge of price risk management is illustrated with a simple hedge with futures, as are the ground rules for trading in Commodity Challenge. There is also a short piece on learning to read grain quotes.

Chapter 2: Cash and futures markets

Edward Usset
The Center for Farm Financial Management

In this short piece, Commodity Challenge players learn the difference between a cash and futures markets, cash and futures contracts, and futures and forward contracts. Different types of orders that can be placed in the market are also explored.

Chapter 3: The evolution of futures trading

Edward Usset
The Center for Farm Financial Management

Commodity Challenge players learn about the evolution of futures trading in the U.S., with a focus on understanding the critical role played by the clearinghouse. The evolution continues in the discussion of the transition from pit trading to electronic trading.

Chapter 4: Market information

Edward Usset
The Center for Farm Financial Management

Important sources of market information published by the USDA are explored, including the WASDE report and other reports. University sources are also introduced, including farmdocDAILY (University of Illinois), AgManager (Kansas State University), and Ag Decision Maker (Iowa State University). Barchart.com is offered as one example of free information resources on the web.

Chapter 5: Futures markets and commodities traded

Edward Usset
The Center for Farm Financial Management

Readers are shown the breadth of commodities traded on major agricultural futures and options exchanges. They also learn the common characteristics of futures traded commodities.

Chapter 6: Standardized terms of the futures contract

Edward Usset
The Center for Farm Financial Management

The standard terms of futures and options contract are explored, including deliverable grades and delivery points, daily price limits, delivery months and more.

Chapter 7: Carrying charges in grain markets

Edward Usset
The Center for Farm Financial Management

In seasonally produced crops (i.e. crops that can be stored like grains), price differences between different futures delivery months are known as carrying charges. The relationship between free grain stocks and carrying charges is explored. The difference between positive and negative carrying charges (aka an inverted market) is also explored.

Chapter 8: Basis

Edward Usset
The Center for Farm Financial Management

Players of Commodity Challenge learn about basis in grain markets, or the relationship between cash and futures prices, and that basis displays a distinct seasonal patterns. They also learn that speculators trade price, while hedgers trade basis.

Chapter 9: Selling futures to hedge the value of grain before harvest

Edward Usset
The Center for Farm Financial Management

In the first section dedicated to pricing tools, Commodity Challenge players learn how producers can sell futures to hedge the value of grain before harvest. Many hedging related terms are introduced and discussed including short hedge, putting on a hedge, lifting a hedge and unwinding a hedge.

Chapter 10: Selling futures to hedge the value of grain held in storage

Edward Usset
The Center for Farm Financial Management

A different type of short hedge is explored; hedging the value of grain held in storage by elevators and producers (aka a storage hedge). The mechanics of rolling a hedge forward is also considered.

Chapter 11: Forward Contracts and Other Pricing Alternatives

Edward Usset
The Center for Farm Financial Management

In the chapter, other grain pricing alternatives are explored including forward contracts, hedge-to-arrive contracts and basis contracts. The pros and cons of each different pricing tool are discussed.

Chapter 12: Commodity buyers and long hedging (buying futures)

Edward Usset
The Center for Farm Financial Management

To gain a complete picture of hedging, it is important to look beyond the producers use of a short hedge to price grain. Here we explore the other side of hedging - the long hedge, or buying futures contracts to hedge against rising prices.

Chapter 13: Hedging vs. speculation

Edward Usset
The Center for Farm Financial Management

To gain a more complete understanding of futures and pricing tools, it is important to explore the roles of hedgers and speculators, and the difference between hedging and speculating. An important question is explored; Is speculation: good or bad?

Chapter 14: Margins

Edward Usset
The Center for Farm Financial Management

Using futures and options contracts demands a basic understanding of margins. The difference between initial and maintenance margins is discussed along with a number of important terms and concepts including mark-to-market, capital and equity, margin calls and leverage.

Chapter 15: Options

Edward Usset
The Center for Farm Financial Management

In this chapter, we begin to explore more advanced pricing tools and the appeal of options. Puts and call options are explored with an emphasis on understanding premiums. Readers will learn to recognize if an option is in-the-money, at-the-money or out-of-the-money.

Chapter 16: Buying put options to establish a minimum price

Edward Usset
The Center for Farm Financial Management

The first advanced pricing tool explored is hedging with put options, specifically buying put options to establish a minimum price. Important concepts and terms are also explored, including delta and the hedge ratio.

Chapter 17: Selling grain and buying call options to establish a minimum price

Edward Usset
The Center for Farm Financial Management

A different advanced pricing tool is explored - selling grain and buying call options to establish a minimum price, sometimes called paper farming.

Developing a Pre-Harvest Marketing Plan (video)

Edward Usset
The Center for Farm Financial Management

This 12-part video takes the viewer through a step-by-step process of developing a pre-harvest marketing plan for grains.

Developing a Post Harvest Marketing Plan (video)

Edward Usset
The Center for Farm Financial Management

This 11-part video takes the viewer through a step-by-step process of developing a post harvest marketing plan for grains.

Commodity Challenge guide for game leaders and teachers

Edward Usset
The Center for Farm Financial Management

The Commodity Challenge Guide for Game Leaders & Teachers answers questions about Commodity Challenge, to encourage the use of this educational resource.

REPORTS & EVALUATIONS

There are no reports or evaluations available for this project.