Commodity Challenge

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Commodity Challenge
A Realistic Online Education Tool to Build
Producers Marketing and Decision Making Skills

• Montana MarketManager
• alex_at_montanamarketmanager.org

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Commodity Challenge - overview

• An Online Marketing Simulation
• Producers trade Futures, Options, and Cash
  commodities
• Local Cash Prices are utilized
• Exercises conducted over 6-9 months
• Participants compete to secure the best prices
  for their commodities

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Commodity Challenge Target Audiences

• Originally Designed for local marketing clubs
• Now serves over 980 producers in 28 states
• 43 simulations are currently in use
• Designed for producers first with other risk
  management education consumers as a secondary
  interest.

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Commodity Challenge - Background

• Commodity Challenge 2.0
• New funding from WCRME allowed major improvements
• Gained Access to over 1450 local cash market
  prices in 28 states
• Commodity service expanded to include Corn,
  Soybeans, HRW, HRS, SRW, Sorghum, Live Cattle,
  and Barley.

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Commodity Challenge - Features

• Getting Started
• Producers will log on to the website
  www.commoditychallenge.com
• They will complete the following process to sign
  up for Commodity Challenge

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• Registration Steps
• UserName and Password
• Pick the Game
• Marketing Savy Quiz
• Develop Marketing Plan

Registration Step 2 Pick the Game to Play
Click the game Title to see a full description of
the game. Use the JOIN button to pick the game
you want to play.
Title Start/End Date Commodities
ND Crops 9/15/2003-6/15/2004 Corn-Hunter,
ND Soybeans-Hunter, ND Wheat(HRS)-Minot,
ND This is a test game 1/12/2002-2/12/2003 Corn-
Grand Island, NE Soybeans-Grand Island, NE
Sorghum-Grand Island, NE
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Game Description
Game Title ND Crops Marketing
Game Description A crop game for North Dakota
marketing club members and facilitators Start of
Game 9/2003 End of Game 6/2004
Corn Soybeans Wheat (HRS)
Cash Market Location Hunter, ND Hunter, ND Minot,
ND Production 30,000 bushels 15,000
bushels 30,000 bushels Harvest Date 10,30/2003 10/
15/2003 8/30/2003 Storage Cost Per Month 3 cents
pr bu. 4 cents per bu. 3 cents per bu. Futures
Market CBOT Corn CBOT Soybeans MGE Wheat Contract
Size, Futures Options 5,000 bushels 5,000
bushels 5,000 bushels Commission, Futures
Options 75/contract 75/contract 75/contract
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Commodity Challenge - Features

• Getting Started
• A participants orientation to Commodity
  Challenge
• Opening page

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Market News MidDay Comments - Corn futures are
trading 1/2 to 1 ¼ cents higher at
midday. Opening Comments Corn futures are
called steady to 1 cent lower. MidDay Comments
Corn futures are trading narrowly mixed at
midsession. ltltAll Newsgtgt Traders Notes Welcome to
Commodity Challenge! This online marketing
simulation is designed to improve your skills and
ultimately your profitability. Click on Help to
access the users guide, a good source for
step-by-step directions on using Commodity
Challenge. Before trading, we recommend printing
the users guide as a reference. Note You cannot
sell on the cash market until after the harvest
date for the game. If you are interested in
having a game set up for your specific needs,
please contact us.
Welcome T. Petry Your Account Commodity Price Corn
206.52 Soybeans 607.87 HRS Wheat 380.02 Last
Update (9/18/2003) Join a Different
Game Minnesota Game Top Rankings Corn
(9/18/2003) G. Hansen 209.88 T. Petry 206.52 K.
Boe 205 Soybeans (9/18/2003) R.
Jaehning 660.50 R. Kramer 612.07 S.
Slykerman 609 HRS Wheat (9/18/2003) J. Vander
vorst 572.35 E. Elseth 387.51 S. Paul 387.51
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Commodity Challenge 2.0 Users Guide

• Welcome
• Overview
• Sign Up to Play
• Playing the Game
• Home Page
• Menu
• Account Status
• Cash Trade
• Futures Trade
• Option Trade
• Open Orders
• Marketing Plan
• Library

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XII. Marketing Plan

• A marketing plan can be a useful tool for
  executing marketing decision. The Marketing Plan
  used in the Commodity Challenge consists of three
  main components
• Marketing Actions these are written
  instructions that spell out what trading
  activities you will perform if the market moves
  the way you expect.
• Default Actions think of these as your back-up
  plan. If the market does not move in your favor,
  what trading actions will you make?
• Time Period The month/year that the marketing
  actions and default actions are in effect.

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XII. Marketing Plan cont.

• To use the Marketing Plan template, click on Add
  Next Month. In the marketing actions box list the
  strategies will you use if the market moves in
  your favor. In the default actions box list the
  strategies will you use if the market moves
  against you. Click the finish button. You can
  refer back to your personal marketing plan
  throughout the game and edit your plans at any
  time by using the edit button.

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Marketing Guide by Dr. Kevin McNew

• Understanding Futures Markets
• Futures Markets What Are They?
• Trading Futures Contracts
• Grain Futures Markets
• Finding Futures Prices
• Using a Futures Broker Accounts and Margins
• Hedging Using Futures Contracts
• Hedging with Grain Futures
• Grain Basis
• Types of Cash Contracts
• Option Contracts for Heding
• Defining an Option Contract
• Using Put Options to Hedge Grain Sales
• Choosing a strike Price for Put Options
• Forward Contracting and Buying a Call
• Advanced Option Strategies

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Marketing Guide cont.

• Fundamental Analysis of Commodity Markets
• Grain Supply and Demand Tables
• Fundamental Analysis of Grain Prices
• Basic Technical Analysis
• Constructing Bar Charts
• Trend Lines
• Head and Shoulders
• Double Tops and Bottoms
• Reversal Formations
• Consolidation Patterns
• Chart Gaps
• Concluding Thoughts on Technical Analysis
• Glossary of Terms

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Commodity Challenge - Features

• Cash Trade
• Participants may sell any amount (not
  necessarily contract lots) of a given commodity
  at the daily local cash price
• May not sell prior to assigned harvest date
• Set-price orders may be placed. (work like a
  price-or-better sell stop)

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Commodity Challenge - Features

• Futures Trade
• Participants may sell buy or sell contract lots
  of a given commodity on current exchange prices
• Day trading is permitted with orders filled every
  ten minutes.
• Every trade is assessed a commission
• Available order types include Market, Set price,
  or stop.

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Commodity Challenge - Features

• Options Trade
• Participants may sell buy or sell options of a
  given commodity on current exchange premiums at
  all pertinent strike prices
• Day trading is permitted with orders filled every
  ten minutes.
• Every trade is assessed a commission
• Options tables available by clicking on a
  contract months quote

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Commodity Challenge - Features

• Account Status
• A summary of current positions
• Accounts for storage and unsold crop
• Futures and options hedging profits included
• Summarizes final price achieved for each commodity

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Wheat (HRS)
Detailed Report Detailed Report Detailed
Report Production 45,000 45,000 55,000 Quantity
Sold 0 0 20,000 Value of Sales 0.00 0.00 81,350
.00 Unsold Inventory 45,000 45,000 35,000 Storage
Cost 0.00 0.00 3,122.95 Total Cash
Value 92,250.00 274,050.00 204,927.00 Futures
Profit 682.50 -510.00 3,497.50 Options
Profit 0.00 0.00 588.75 FuturesOptions
Profit 682.50 -510.00 4,086.25 Net
Value 92,932.50 273,540.00 209,013.30 Net
Price 206.5 607.9 380.0
Minnesota Game
User
Tim Petry
Reports
Cash Sales Futures Positions Option Positions
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Detailed Report for HRS Wheat Cash Sales Sold
Date/Time (CST) Quantity Price Value 8/20/2003
52900 PM 5,000 405.00 20,250.00 8/19/2003
100600 AM 10,000 413.00 41,300.00 8/13/2003
121500 PM 5,000 396.00 19,000.00 Total
Sales 20,000 406.8 81,350.00 Unsold
Inventory 35,000 362.0 126,700.00 Storage
Cost 3,122.95 Net-Cash Value 204,927.00 Futur
es Profit
Date/Time (CST) Position/Contract Quant. Price Las
t Price Comm. Status Profit 8/21/2003 94500
AM Sell Dec-03 MGE Wheat 1 396 347.5 30 OPEN 2,39
5.00 8/19/2003 100541 AM Buy Sep-03 MGE
Wheat 1 372 395.25 60 CLOSED 1,102.50 Net-Profit
on Futures Positions Option Profit Date/Time
(CST) Position Contract Quant. Price Last
Price Comm. Status Profit 8/13/2003 14500 Buy
Dec-03 MGE Wheat 360 Put 1 7.5 19.875 30 OPEN 588
.75 Net-Profit on Option Positions 588.75 T
OTAL COMMODITY VALUE 209,013.30 NET-PRICE
380.0
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Commodity Challenge - Features

• Other Features
• Quotes futures, options, and cash
• Charting software allows charting of all futures
  contracts
• Interactive charting of local prices
• Basis Charting!!!

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Commodity Challenge Plans

• This year we will all play the same game.
  Hopefully, A livestock (feeder cattle, fed
  cattle) game will be available.
• Next year we can set up as many games as
  requested. i.e. geographic, commodities,
  individual club(s), etc.
• We will need feedback!

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• Questions?
• Comments!
• Tim Petry
• tpetry_at_ndsuext.nodak.edu
• 701-231-7469

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Questions?
Alex Offerdahl Program Coordinator Montana
MarketManager alex_at_montanamarketmanager.org (406)
761-4596 www.commoditychallenge.com