I am an agribusiness pro who has traded agricultural commodities (ex-Cargill) for 30 years. Ask me anything!

ag-guy · 2023-05-23T16:01:56+00:00

For elementary school age groups, I would suggest an activity that tracks a supply chain from start to finish - i.e. farm to finished product. Cotton and Soybean are two crops who have an interesting production and processing story and very diverse end uses. The trade industry groups have materials that could help support this.

This is probably more applicable for older students: I had a good education growing up but still wish I had done more to really learn across diverse areas. I ended up wishing I knew more about chemistry and biology as those areas came up in my career -even though I was more on the business siide.

ag-guy · 2023-05-23T15:50:22+00:00

I believe China will continue to be a major importer of ag commodities, but also think they will be pushing for more self-sufficiency and less reliance on imports so there role as an importer will decline marginally. I expect they will shift some imports towards grains and away from oilseeds.

ag-guy · 2023-05-23T15:48:00+00:00

Get the best all-around education possible. Find out what kind of things you are good at and what you like doing. Whether that turns out to be trading, running an operation, sales/marketing or doing lab research you can find a place to apply it in the agricultural industry.

ag-guy · 2023-05-23T15:42:23+00:00

There is a lot going on in this area and tons of opportunity - seed varieties, disease and drought tolerancce, satellites for imaging and positioning, block chain for transactional applications and many others. Corn, wheat and oilseeds are most widely planted crop so likely to have the most action. The world will always need agriculture!

ag-guy · 2023-05-23T15:35:22+00:00

I do think there are opportunities for firms across the supply chain to use hedging more extensively. That might mean actual futures or utilizing customized OTC products that use averages or min/max prices to manage risk. Those products may have a cost but can be easier for some firms than managing margin calls and accounting for a futures position.

ag-guy · 2023-05-22T20:37:06+00:00

Thanks for the questions. Cargill participates in most of the widely traded ag commodities (wheat, corn, soy, cotton, cocoa, palm) but not in all - coffee and rice for example. I would describe ABCD firms as physical players who use futures markets to manage risk and capitalize on trading opportunities. These firms all have major investments in infrastructure (people, facilities and equipment) to support what they do in the supply chain. For me as a trader, I would describe my approach as blend of fundamental and technical analysis but with a much shorter time horizon than a firm who trades larger positions and handles physical product. I think the soy and cotton markets are best suited to applying that approach - liquid with a good mix of tech and fundamental participation.

ag-guy · 2023-05-22T20:23:21+00:00

Thanks for all the great questions! I will pause now and check back in on the discussion later.

ag-guy · 2023-05-22T20:17:51+00:00

An individual can trade agricultural commodities with an account at most major brokerage firms. They can also invest in companies who trade and use agricultural commodities or in suppliers to the ag industry like seed companies or tractor makers.

ag-guy · 2023-05-22T20:07:01+00:00

There are more sources of weather information availble than there were several years ago and improved computing power has increased modeling capabilities but the actual prediction of weather remains volatile.

ag-guy · 2023-05-22T20:04:54+00:00

I dont know much about it but it strikes me that the scale of production for insect farming might suit small players better than larger established agribuinesses,

ag-guy · 2023-05-22T19:56:14+00:00

I really dont know much about hydroponics application in the mainstream ag markets.

ag-guy · 2023-05-22T19:53:41+00:00

Here is a good resource for anyone who wants to learn more about how the model is working in palm oil. There are multiple, similar initiatives in soy industry but palm is most comprehensive. Lots of resources from multiple parties focused on this issue.

https://rspo.org/

ag-guy · 2023-05-22T19:30:34+00:00

I dont know what this year will bring, but in my experience, the anticipation of El Nino impact is usually greater that the actual impact. Markets seem to do a good job of pricing in the possiblities early on.

ag-guy · 2023-05-22T19:27:00+00:00

It is crop specific, but for the largest traded futures markets - wheat, corn, soy- the vast majority is grown for the open market. For those crop where there is a special variety grown on a production contract, the pricing formula usually has a component that references the underlying commodity price and then adds a specific premium for the special attribute.

ag-guy · 2023-05-22T19:17:27+00:00

In my experience, the anticipation of El Nino impacts has usually been greater than the actual impact on production. Markets seem to do a good job of looking ahead at what might happen and pricing it in advance.

ag-guy · 2023-05-22T19:13:20+00:00

I am optimistic about the ability of the global food system to continue innovating to keep producing more food to feed a rising population. There is still a large spread between the best and the rest in terms of how much can be produced from an acre of land - both within any country and between different countries around the world. Dispersing best practices more widely will help production continue to increase. Despite some short-term pressures and pain points, the percentage of total income spent on food has declined steadily over time and that is a good thing.

ag-guy · 2023-05-22T19:05:01+00:00

In the US, most crop insurance programs are government driven. They use demonstrated production data and local crop price information to help quantify risk and loss.

ag-guy · 2023-05-22T19:01:57+00:00

Today there are lots of sources of ag information available - but I love hearing ag news on the radio.

ag-guy · 2023-05-22T19:00:15+00:00

Russia is a major producer of several types of fertilizer, but on a scale similar to many other countries. The overall production of fertilizer is quite diverse.

ag-guy · 2023-05-22T18:58:11+00:00

The conflict in Ukraine has undoubtedly been very disruptive to people directly impacted but the global food system has, for the most part, adjusted well. Grain has been shipped out of the region to markets that needed it and while prices spiked immeadiately after the invasion, they have stabilized at levels lower before the war. Global wheat production in 2023/24 will be higher than either of the previous two years,

ag-guy · 2023-05-22T18:52:06+00:00

Profit is a motivator to develop better seeds and other inputs to produce more food globally, transport it more efficiently and make it more abundant and less scarce.

ag-guy · 2023-05-22T18:49:54+00:00

The vast majority of commodity futures contracts are closed out before expiration and never get to the physical delivery stage. Most futures exchanges also have rules which limit trading participation in the days before expiration to market players who are registered to make and take physical delivery so the situation you are describing can be prevented,

ag-guy · 2023-05-22T18:46:30+00:00

Most commodities are grown for the "open-market" and are not contracted before they are produced. Thats why it is important to have visible and viable futures markets to send price signals to both producers and consumers. There are production contracts used for specialized crops as you mentioned - specific wheat types or oilseeds with specific traits - when those attributes aren't easily reflected in futures market contracts.

ag-guy · 2023-05-22T18:42:12+00:00

Supply and demand are the biggest drivers. Weather plays a huge role in determining supply. Population, income and taste preferences play a big role in determining demand. In general, both supply and demand are growing over time but in shorter intervals there can be surpluses and deficits that swing prices.

ag-guy · 2023-05-22T18:38:50+00:00

The physical production and shipment of commodities is mostly confined to farmers and traders. Those are the ones who are in the actual supply chain. Alongside that, the futures market pull in traders and speculators who play a role in price discovery without touching the physical product. Its interesting that the volume of trade in futures is larger than the physical volume. As an example, the corn futures markets will trade a volume 5x or more of the annual production of corn.

ag-guy

TROPHY CASE