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The Ortonville Independent
Ortonville, Minnesota
December 22, 1998     The Ortonville Independent
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December 22, 1998

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Extension report I I I John Cunningham, County Extension Director 839-2518 or 1-800-279-2518 MARKETING OPTIONS Craig Haugaard, Swift County Extension Educator, developed the material below. Most farms don't have a grain price protection plan in place. In July of 1996, the corn price in West Central Minnesota exceeded $5.00/bu. Very few farmers received prices near the $5.00 level since they had priced their crop earlier in the year. Once priced they did not put themselves into a position to gain from future price increases. Much the same thing happened in 1998, only in reverse. In the fall of 1997 many farmers placed their crops in storage and held for a price rally. Again, few farmers initiated any price protection against a declining market. The corn market did decline from $2.40 a bushel in March of 1998 to under $1 .40/bu. in the fall of 1998. Soybean prices also declined over the same period. Most folks would be pretty nervous about owning an asset, like a $150,000 house, without carrying any insurance to protect it against a loss. Yet, the same people will carry a large inventory of grain, which is subject to a price change loss of equal magnitude, without even thinking abotft insuring it. Most agricultural price analysts agree that with the enactment of the "Freedom to Farm Act" in 1996 we can expect even more price volatility than we have had in the past. If that is true, then protecting your current market position may be critical to the survival and prosperity of your farm business. One could argue that the average farm in West Central Minnesota lost over $25,000 in 1996 and again in 1998 because they didn't protect against adverse price movement. Assuming an average farm of 650 acres divided equally between corn and soybean production, it would produce about 41,000 bushels of corn a year and about 12,000 bushels of soybeans. If price protection would have resulted in an increase of only $.50 a bushel, it would have resulted in $26,500 more net income per farm per year. One way to manage price risk is to purchase futures options. When options are used, price protection is purchased for a known fixed price. With options, only the option cost is at risk. You can look at the cost of an option almost exactly the same way you look at the cost of an insurance premium. If prices move against you, he optioa atil/ make,ap for ...... ,. Jtost revent. Ifvour option expires vorthleSa; it's l{le'+paying for aub, crop or fire insurance, if you don't have a loss within the given period, your premium is gone, but you had the protection you desired. If you have priced your crop, you face the risk of the market moving'up after you have sold and missing out on the price increase. You can protect against missing a rising market by buying call options. A call option gives you the right to buy a futures contract sometime in the future at a given price for a given cost. A call can give you unlimited upside price potential at a fixed cost. The strike price is the per unit price at which you choose to set your purchase or selling price. For example, buying a put at a $2.50 strike price gives you the right to sell at $2.50 per bushel. A $2.50 call gives you the right to buy at $2.50 per bushel. Determining what strike price to use or how much to invest in the price insurance is a difficult decision to make. If you are willing and able to pay a big insurance premium for the call option, you would buy your call as close to the current futures price of the grain as possible ("at the money"). If the price goes up, you will get most of the price increase, minus the cost of your option. However, you may wish to go "out of the money" so that your option will be less costly. If a $2.30 "at the money" call costs $.101bu. and a $2.40 "out of the money" call costs $.05/bu., you can reduce the cost of your price insurance by buying the $2.40 call for a nickel. You will not receive as much price protection, but the cost is reduced. It is difficult to effectively capture a small price gain with options. With this in mind it might then be prudent to spend less money for the "out of the money" option and trying to capture only the big price moves if or when they occur. If you are storing unpriced grain, you may want to protect against lower prices with a put option. A put option gives you the right to sell a futures contract at some time in the future at a given price for a given cost. A put would place a floor under the market at a fixed cost. Assume that in the spring of 1998 you had bought a put option to protect against a drop in the price of the soybeans that you were holding in storage. You may have purchased an "out of the money" put for $.10/bu, which may have protected and captured about $1.25 of the $1.75/bu price drop, that occurred into September of 1998. So, an investment of $.10/bu. may have returned you an additional $1.25/bu. or more. The markets have become to volatile to just roll the dice with your crop's pricing every year. The future is full of potential and challenge but to really flourish in the 21St century you will have to take advantage of all the marketing tools that are at your disposal. Extension Materials Now Available The Extension Office has received their supply of the Farmer's Tax Guide, the Minnesota Varietal Trials, Minnesota Farm Account Books, and the 1999 Minnesota Gardening Calendar. Stop by the Office at your convenience to pick up your copies. The Farmer's Tax Guides can also be picked up at any of our County's five banks. WARNING Aeration Systems Starting on or after Dec. 28, 1998. Will cause thin ice conditions. Artichoke Lake / Long Tom Lak.e / Lake Hattie SAVE-A-LAKE AERATION Extension report Jean Kvols, County Extension Educator IT'S TURKEY TIME - Proper and safe handling practices for turkey are essential. They are even more important than product knowledge and wise purchasing practices. Shopping: Grocery shop last; get food home within 2 hours. Observe "use-by" dates. Storing: For fresh turkey, refrigerate turkey at 40 degrees E Use or freeze within 1 to 2 days. Freeze turkey at 0 degrees F. For frozen turkey, use whole body turkey within 12 months. Use frozen ground turkey and turkey parts within 2 to 8 months. Store turkey products in their original wrappers. Check the wrap for tears or perforations. Add protective, moisture. and vapor-proof wrapping, if necessary. Preparing: Wash hands before preparing food. Wash utensils, cutting boards, and working areas after each use or each type of food, raw or cooked. Thawing: Thaw the frozen turkey in its original wrap on a tray in the refrigerator, allowing 24 hours for every 5 pounds. Cook turkey immediately after thawing. Cooking: Thoroughly cook raw turkey at 325 degrees E to an internal temperature measured by a meat thermometer inserted into the deepest part of the muscle. Juices should run clear; meat should not be pink. Do not partially cook turkey. Never let raw or cooked turkey stand at room temperature or in a warm oven at less than 200 degrees E Serving: Refrigerate turkey immediately after serving. Serve hot food at 140 degrees F.; serve cold foods at 40 degrees F. Cut or hold only the amount of turkey that can be served within a 20 to 30 minute period. Leftovers: Promptly refrigerate or freeze leftovers in small, shallow containers within 2 hours of cooking. Use within 3 to 4 days. Reheating: Reheat leftovers at 165 degrees F. Turkey gravy should be brought to a boil. DATES TO REMEMBER: December 24 - Courthouse closes at noon in observance of Christmas December 25 - Courthouse closed for Christmas - nMerry Christmas!" December 29 - 4-H Standing Committee Meetings at Courthouse: Achievement @ 4:00 p.m.; Promotion @ 4:45 p.m.; Projects Unlimited @ 5:30 p.m.; and Livestock @ 7:00 p.m. January 1 - Courthouse closed for New Year's Day - "Happy New Year!" Merry,Christmas INDEPENDENT ( "_'-g_ /  -" lr "11- j," ,, wisn you a very Merry and WANT ADS PAY Blessed C_4aristmas. t"  1    pip   :'1 I' 'HaveA'Lovely '" +" Tuu"n" LlgltT I Christmas I We're honored to be of sece \\;I l[| qPl,'; I to such a beautiful community. i Thanks, (1 lr 11110 ' I .... uiatr+ IClassnc hlV500 We thank you Ortonville, MN Robin Sharon - Dawn Heather With warm wishes for a year that's packed with good cheer. We really appreciate your shopping herel Bud's Bait Ortonvllle Area news digest APPLETON-A burglary occurred during the early morning Monday, Dec. 14 at Den's Food Pride according to Appleton Chief Doug Moe. A large amount of cartons of cigarettes were The police are looking for a possible suspect vehicle: a late 70s 80s Ford truck, white in color with two red stripes and a amount of rust. MILBANK, SD--Progress on the windmill restoration was re at Monday's Milbank City Council meeting by councilman Lieffort. The cap and sails will be removed after the first of the said Lieffort. A crane from Henrich and sons will be used to top off the mill and Milbank House Movers will transport the cap sails to the city shop for storage, said Lieffort. The same day, he a temporary cover will be put in place on top of the mill. building the hex-shaped cover. Milbank Lumber has provided work space. The temporary cover could remain on top of the as long as three years. Lieffort said, depending on how fast restoration progresses. MONTEVIDEO--Wegdahl, with its population of less than 50, is of the most unlikely places to expect 11 fire departments to forces to fight one of the biggest fires seen in Chippewa County. small town was a flurry of action all day Thursday as firemen fouc contain an elevator fire - a prairie skyscraper - that burned candle in the wind. Thursday at approximately 9:30 a.m., Coulter, manager of Granite Falls Ventures Inc., which now the Wegdahl elevator complex, said one of his employees their 120-foot-tall elevator to bring out a skid loader when he smoke and sparks. The Montevideo Fire Department was called to scene about six miles southeast of Montevideo alongside Minnesota River. HANCOCK-A break-in occurred at the Hancock Public School Nov. 26th sometime after 9 a.m. It is believed that entry was through temporary construction doors made out of plywood, open into the high school principal's office. WHEATON-Traverse County will soon be looking for a new At Monday's meeting of the Stevens County Board Commissioners, the Board voted to cease sharing Stevens engineer Merle Farley with Traverse County, effective Jan. 1. For past several months, Farley has been serving as engineer for Stevens and Traverse County, while Traverse attempted to replacement for their engineer. The decision to cease sharing kills a proposal by Traverse County to share Eadey on a basis. I Shif00 in00o Holiday Everyone here is all rewed up to wish you a high-powered holiday celebration, where everything runs smoothly! ORTONVILLE AUTO & SUPPLY, INC. West Hwy. 12 Phone 839-6172 Ortonville, MN From the tiniest field mouse to the mightiest whale, every single living creature is a reflection of God's love and reminds us to give our thanks for the many flne gifts He bus put on this earth. Merry Christmas! Hedge & Herberg Trucking Box 98 Big Stone City, South Dakota 57216 Phone (605) 862-8143 Page 10c  INDEPENDENT Tuesday, Dec. 22,