Take the challenge
A new way to learn how to use grain marketing tools is being in-
troduced to farmers this winter. Called the Iowa Commodity Challenge, it’s an online market simulation game providing participants with knowledge to improve their strategies for selling cash corn and soybeans, as well as learning how to use futures and ag options in marketing.
Iowa State University Extension and Iowa Farm Bureau developed this unique educational tool and are making it available. “The Iowa Commodity Challenge gives participants a chance to sharpen their crop marketing skills and develop strategies,” says Ed Kordick, Farm Bureau’s commodity services manager. “In these times of very volatile prices and tightening profit margins, understanding how to use these tools to help you make better marketing decisions is very valuable.”
• Online simulation can improve your crop marketing skills and profitability.
• Game lets you use futures, options and other pricing tools in real-time setting.
• Participants try out strategies and explore how different marketing tools work.
Participating farmers have the opportunity to use futures and options with fictitious bushels instead of spending real money and possibly losing it as a learning experience. “This game is online, but you’re actually buying and selling futures in real time 24/7,” says Steve Johnson, ISU Extension farm management specialist. “Also, you can buy and sell puts and calls.”
Learn without losing money
To begin, each participant gets 50,000 bushels of corn and 20,000 bushels of soybeans — all fictitious. The grain is stored at the local co-op, accruing storage costs and interest at 6 cents per bushel per month. The challenge is to use a variety of marketing tools to get the grain sold by Feb. 29 — when the game ends.
“It gives players a chance to look at commodity markets and how they work over the course of several months,” says Johnson. “The game reflects what’s going on in the real world, so we can try out strategies in a market setting and explore how the tools work.”
The online program is based at the University of Minnesota, and ISU Extension grain economist Chad Hart, along with Johnson and Kordick, adapted it to use local prices and marketing situations for Iowa participants. “Basically, we developed a curriculum,” says Hart. “It’s a 40-page workbook with weekly activities.”
That activity includes keeping weekly charts to track basis, for both spot-cash and forward-contract delivery. Every Wednesday participants track the March futures close for corn and soybeans.
Participants keep track of their futures or options positions. They need a user name and password to play the Iowa version of the game. Anyone can go to the www.commoditychallenge.com site, maintained by the University of Minnesota, to sign up and play.
“But what makes the Iowa game unique is we’ve created the bushels, weekly activities and workbook. We’re tracking local cash prices at elevators, making it realistic,” says Johnson.
He adds, “The fun part of participating in this game isn’t about winning; it’s learning how these marketing tools work. How futures work with cash prices and basis. A farmer doesn’t have to just sell crops for cash, or forward contract. You can sell futures. You can buy puts. Or you can sell a cash commodity and buy calls.”
To learn more about the 2012 Iowa Commodity Challenge, each of the four marketing clubs ISU Extension works with in central Iowa devoted their November meeting to register for the program.
If you couldn’t attend a meeting in November to get started, you can still sign up and participate in this program over the Internet if you’re an Iowa Farm Bureau member. For more information, contact Ed Kordick at 515-225-5433 or email him at [email protected]
This article published in the December, 2011 edition of WALLACES FARMER.