Risk management education for wyoming livestock producers
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Risk Management Education for Wyoming Livestock Producers. Custom Ag Solutions Brett Crosby Casey Crosby January 10, 2005. Custom Ag Solutions. Established in 2004 Based in Cowley, Wyoming Previous Experience Focus on Agricultural Finance Risk Management Feasibility Valuation

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Risk Management Education for Wyoming Livestock Producers

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Risk management education for wyoming livestock producers

Risk Management Education for Wyoming Livestock Producers

Custom Ag Solutions

Brett Crosby

Casey Crosby

January 10, 2005


Custom ag solutions

Custom Ag Solutions

  • Established in 2004

  • Based in Cowley, Wyoming

  • Previous Experience

  • Focus on Agricultural Finance

    • Risk Management

    • Feasibility

    • Valuation

    • Technology Applications

Custom Ag Solutions


Custom ag solutions1

Custom Ag Solutions

  • Casey Crosby

    • BS in Animal Science;

    • 8 Years Ag Production Experience

    • 2 Years Ag Finance Consulting

  • Brett Crosby

    • BS in Animal Science; MBA

    • 16 Years Ag Production Experience

    • 8 Years Ag Finance Consulting

  • Other Key Employees

Custom Ag Solutions


Risk management agency rma

Risk Management Agency (RMA)

  • USDA Agency

  • Created in 1996 to Administer the Federal Crop Insurance Program

  • Three Divisions

    • Insurance Services

    • Research & Development

    • Risk Compliance

  • RMA Quick Facts

    • Over 500 Employees

    • Ten Regional Offices

    • Main Offices in Kansas City and Washington, DC

Custom Ag Solutions


Risk management agency rma1

Risk Management Agency (RMA)

RMA’s Vision:

To serve America’s agricultural producers through effective, market-based risk management solutions.

RMA’s Mission:

Promote, support, and regulate sound risk management solutions to preserve and strengthen the economic stability of America’s agricultural producers.

Custom Ag Solutions


Risk management agency rma2

Risk Management Agency (RMA)

RMA’s Approach:

  • Partner with Public and Private Organizations to Develop New Risk Management Programs.

  • Partner with Private Insurance Companies to Deliver Risk Management Products (e.g., crop insurance, LRP).

  • Partner with Public and Private Organizations to Provide Risk Management Education.

Custom Ag Solutions


What is risk

What is Risk?

Think “Chance”

and

Think “Bad”

Custom Ag Solutions


Chance and bad

“Chance” and “Bad”

Custom Ag Solutions


What is risk management

What is Risk Management?

Think “Risk”

and

Think “Reward”

Custom Ag Solutions


Risk and reward

“Risk” and “Reward”

Custom Ag Solutions


What is risk management1

What is Risk Management?

Risk Management Means

Balancing

Risk and Reward

Custom Ag Solutions


Risk and reward1

“Risk” and “Reward”

Custom Ag Solutions


What is risk management2

What is Risk Management?

Risk Management Means

Balancing

Risk and Reward

Custom Ag Solutions


Risk and reward2

“Risk” and “Reward”

Custom Ag Solutions


What is risk management3

What is Risk Management?

Risk Management Means

Balancing

Risk and Reward

Custom Ag Solutions


Risk and reward3

“Risk” and “Reward”

Custom Ag Solutions


What is risk management4

What is Risk Management?

Risk Management Means

Balancing

Risk and Reward

Custom Ag Solutions


Risk and reward4

“Risk” and “Reward”

Custom Ag Solutions


The three rules of risk management

The Three Rules ofRisk Management

1. Don’t Risk a Lot for a Little.

2. Don’t Risk More Than You Can Afford to Lose.

3. Know the Odds.

Custom Ag Solutions


Know the odds

Know The Odds

What is Chance?

Heads

Tails

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A fifty fifty chance

A “Fifty – Fifty” Chance

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A one in five chance

A One-in-Five Chance

Five Doors

One Good Result

1

2

3

4

5

Choose a Door

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Know the odds1

Know The Odds

How Often Do We Know the Chance of a Given Outcome?

How Can We “Know the Odds” in Agriculture and Livestock Production?

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Know the odds2

Know The Odds

Information

  • Experience

  • Education

  • Data Collection

    Analysis

  • Summaries

  • Statistics

  • Decision Support Tools

Custom Ag Solutions


What is risk management5

What is Risk Management?

Risk Management Means

Balancing

Risk and Reward

Custom Ag Solutions


The three rules of risk management1

The Three Rules ofRisk Management

1. Don’t Risk a Lot for a Little.

2. Don’t Risk More Than You Can Afford to Lose.

3. Know the Odds.

Custom Ag Solutions


Section ii

Section II

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Let s check your risk management skills

Let’s Check Your Risk Management Skills

  • Start with $5.00.

  • Make four decisions.

  • If you lose all of your money at any time, you are out.

  • The person with the most money after four decisions wins.

Custom Ag Solutions


Decision 1

Decision #1

Risk $4.00

Earn $5.00 (Net +$1.00)

For an 80% Chance to

+

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Decision 11

Decision #1

Risk $4.00 for an 80% Chance to Earn $5.00 (Net +$1.00)

X

Avoid the Big X …

3

4

5

7

8

10

1

2

X

X

6

9

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Decision 12

Decision #1

Risk $4.00

Earn $5.00 (Net +$1.00)

For an 80% Chance to

X

X

+

Custom Ag Solutions


Decision 1 analysis

Decision #1 Analysis

RULE 1. Don’t Risk a Lot for a Little!

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The three rules of risk management2

The Three Rules ofRisk Management

1. Don’t Risk a Lot for a Little.

2. Don’t Risk More Than You Can Afford to Lose.

3. Know the Odds.

Custom Ag Solutions


Decision 2

Decision #2

Risk $5.00

Earn $25.00 (Net +$20.00)

For a 25% Chance to

+

Custom Ag Solutions


Decision 2 analysis

Decision #2 Analysis

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Decision 2 analysis1

Decision #2 Analysis

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Decision 2 analysis2

Decision #2 Analysis

Custom Ag Solutions


Decision 2 analysis3

Decision #2 Analysis

RULE 2. Don’t Risk More Than You Can Afford to Lose!

Custom Ag Solutions


The three rules of risk management3

The Three Rules ofRisk Management

1. Don’t Risk a Lot for a Little.

2. Don’t Risk More Than You Can Afford to Lose.

3. Know the Odds.

Custom Ag Solutions


Decision 3

Decision #3

20% Chance of Loss

Pay $3.00

Or Risk Losing $15.00

X

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Decision 3 analysis

Decision #3 Analysis

Don’t Risk More Than You Can Afford to Lose

Custom Ag Solutions


The three rules of risk management4

The Three Rules ofRisk Management

1. Don’t Risk a Lot for a Little.

2. Don’t Risk More Than You Can Afford to Lose.

3. Know the Odds.

Custom Ag Solutions


Decision 4

Decision #4

Receive $5.00

Making or Losing

$25.00

X

Or take a 50% Chance of

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Decision 4 analysis

Decision #4 Analysis

Rule 3. Know the Odds

Custom Ag Solutions


The three rules of risk management5

The Three Rules ofRisk Management

1. Don’t Risk a Lot for a Little.

2. Don’t Risk More Than You Can Afford to Lose.

3. Know the Odds.

Custom Ag Solutions


Know the odds understand the odds

Know the OddsUnderstand the Odds

What is the Difference Between Investing and Gambling?

The Odds are Against You When You Gamble.

The Odds Should be with You When You Invest.

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Playing for keeps

Playing for Keeps

  • Each of you now has $1.00.

  • You may keep your dollar, or risk it in the next two decisions.

  • Depending on your decisions and chance, you may

    • Double your money,

    • Lose your entire dollar, or

    • Land somewhere in the middle.

Custom Ag Solutions


Decision a

Decision A

Pay 25 Cents

Losing $1.00

Or Take a 33% Chance of

X

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Decision a analysis

Decision A Analysis

Rule 3. Know the Odds

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Decision b

Decision B

Receive 25 Cents

Or Risk 75 Cents

For a 40% Chance of

Earning $2.75 (Net +$2.00)

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Decision b analysis

Decision B Analysis

Risk vs. Reward…

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Risk management education for wyoming livestock producers

Greater Risk Should Have Greater Reward

Risk: “Chance” and “Bad”

  • Investing is Not Gambling; Keep the Odds in Your Favor.

  • Regardless of the Odds, When Risk Exists, You may Realize a Loss.

  • Greater Risks Require Greater Rewards.

Custom Ag Solutions


The three rules of risk management6

The Three Rules ofRisk Management

1. Don’t Risk a Lot for a Little.

2. Don’t Risk More Than You Can Afford to Lose.

3. Know the Odds.

Custom Ag Solutions


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