Volume 4, Issue 1, March 2022
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Teaching and Educational Methods
Trading Commodity Futures and Options in a Student-Managed Fund
Matthew A. Diersen and Zhiguang Wang
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Posted online: March 24, 2022
doi: 10.22004/ag.econ.320044
Abstract: Student-Managed Investment Fund (SMIF) programs and classes often involve the active management of a stock or equity fund. Complementing these is a unique fund, similar to a commodity pool, that invests directly in agriculture futures and options contracts. This paper presents a trading course that is offered where the class proposes and executes trades in the POET Student-Managed Agricultural Commodities Fund, which is owned by the South Dakota State University (SDSU) Foundation. The course objectives are to: (1) enhance market analysis skills, (2) master trading tools and techniques, and (3) advocate for prudent risk management in trading. Trading drills are used to gain competency in a speculative setting that requires detailed understanding of order entry and exit timing, price levels, and various order types. Real trades are considered including buying and selling futures, options, and combinations of agriculture-related contracts in a margin account. While many of the executed trades are “textbook examples” of how trading should work, the nuances provide teachable moments. The curriculum and fund characteristics are described here to inform other programs that may want to consider adopting a similar course.
Keywords: Broker, commodities, experiential learning, speculation
Adaptation of Teaching Strategies During the COVID-19 Pandemic
Luis Moisés Peña-Lévano and Grace Melo
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Posted online: March 22, 2022
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doi: 10.22004/ag.econ.320045
Abstract: The COVID-19 pandemic forced drastic changes in teaching methodologies, shifting from in-person courses toward fully online platforms. This article presents teaching strategies used to modify two traditional face-to-face courses (Economics of Resource Use and International Agricultural Trade) and one synchronous online course with in-person review sessions (Quantitative Methods in Food and Resource Economics) into an entirely virtual setting. This article discusses the challenges of moving content online while maintaining interaction with the students. It also exposes significant factors that have become impending challenges for online instruction during the pandemic. This study also examines students’ perception of their learning experience. Using a paired comparison test, academic performance was evaluated before and during the pandemic, showing that teaching methodologies implemented in the three courses were able to keep students’ engagement throughout the spring semester. These methodologies sought to provide a personalized approach and keep students engaged in the lectures. Further, this study discusses the impact of the pandemic on the students’ perception of their learning experience.
Keywords: Active learning, evaluation, online tools, student engagement, teaching, teaching innovations
Laura A. Paul, Olesya M. Savchenko, Maik Kecinski, and Kent D. Messer
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Posted online: March 11, 2022
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Teaching Notes
Classroom Instructions
doi: 10.22004/ag.econ.320046
Abstract: Scientific information can be used to help people understand and describe the world. For example, consumers regularly seek out information about their food and drink to help inform their purchasing decisions. Sometimes, however, consumers can respond negatively to this information, even when the information did not intend to convey a negative signal. These negative responses can be the result of misunderstandings or strong, visceral, emotional behavior, that can be challenging to foresee and once arisen, difficult (and expensive) to mitigate. In this paper, we show how educators can use an in-class economic experiment to introduce the power of a sludge—a small behavioral intervention that leads to worse outcomes. We provide a step-by-step guide to take students through a demand revealing design using a second-price, willingness-to-accept (WTA) auction that tests preferences for tap water and bottled water when students receive total dissolved solids (TDS) information. Additional classroom discussion topics are presented, including comparing nudges and sludges, the public response to the treatment of tap water, and the role of safety information in consumer response.
Keywords: Behavioral economics, classroom game, experiential learning, informational nudge, second-price auction, willingness-to-accept
Case Studies
Negotiating for a Grain Elevator Purchase: Valuations of Willingness to Buy and Willingness to Sell
Austin Liepold, Marin Bozic, and Michael A. Boland
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Posted online: February 10, 2022
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doi: 10.22004/ag.econ.320047
Abstract: North America Small Grains Trading Company (NASGTC) is a North American grain trading company investigating grain elevator location prospects to expand their grain origination territory. In 2021, NASGTC purchased grain at a premium from third-party suppliers or country elevators in North America to fill their terminal space at various locations or directly ship to their small grain (defined as oat, hard red spring wheat, rye, durum, and canola) end-user customers with a focus on identity-preservation to help support consumer label claims. Since its founding in 2013, NASGTC has operated terminal elevators efficiently without any origination locations. The NASGTC is in initial diligence to acquire the assets of a Canadian grain elevator to originate additional oats. The objective of this case study is to determine whether it is economically feasible to acquire a grain elevator to own more of the margin in the oat supply chain.
Keywords: Agribusiness, case study, finance, oats, net present value
Why No Debt? A FRICTO Analysis of the Capital Structure of Cal-Maine Foods Inc.
Carlos J.O. Trejo-Pech and Susan White
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Posted online: February 10, 2022
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doi: 10.22004/ag.econ.320048
Abstract: Cal-Maine Foods Inc., the largest egg producer in the world, has historically operated with low debt. Cal-Maine reported in its 2021 third fiscal quarter no debt on its balance sheet, making this company one of the few debt-free publicly traded agribusinesses in the United States. This case analyzes Cal-Maine’s capital structure, which represents a rare case for exploring and challenging the notion of optimal capital structure in theory and practice. Understanding the rationale behind a debt-free firm’s policy is puzzling because financial theory predicts that adding debt up to a certain level—the optimal capital structure—creates economic value for equity holders. According to surveyed chief financial officers, there is also evidence that practitioners use an optimal capital structure framework for financial management decisions. By applying a framework allowing for both qualitative and quantitative analysis, this case reviews the benefits and costs of debt in the capital structure, as applied to Cal-Maine. The case asks students to evaluate potential recapitalization policies in which Cal-Maine adds debt to its capital structure and uses debt proceeds plus excess cash to repurchase shares at the prevailing price as of the end of May 2021. The target audience is graduate business and agribusiness students, although the case could be used in an elective advanced undergraduate finance course.
Keywords: Agribusiness finance, cage-free eggs, corporate finance, optimal capital structure
Teaching and Education Commentaries
The Knowledge and Skills Required to Be a Successful Entrepreneur
Luis Alberto Sandoval
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Posted online: February 7, 2022
doi: 10.22004/ag.econ.320049
Abstract: Entrepreneurship has become an important topic at universities, especially in developing countries where the job market has become saturated and wages are low compared to the developed world. To strengthen its entrepreneurship curriculum, Zamorano University asked its alumni what knowledge and skills are required to be a successful entrepreneur. To analyze the responses, data mining techniques were employed. Interpretation of the results of word frequencies, associations, and a dendrogram yielded nine thematic areas that should be the focus of entrepreneurship programs at universities, according to actual entrepreneurs and experts working in agriculture. While some of the themes were expected, such as discipline-specific and business administration knowledge, other themes, such as resilience to a changing business environment, were sort of a surprise.
Keywords: Data literacy, entrepreneurship, innovation, resilience, Zamorano, risk