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Lesson Plan

Name: ______Date: ______

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Class and Grade / Ag. III & IV – Juniors and Seniors
Unit/Area/Enterprise / Commodities Marketing
Lesson Title/Job / Understanding the Futures Market
Situation/Rationale / The futures market has a huge impact on the price of agricultural goods and services. Understanding how the futures market works will help students have a better understanding about the economy and the agricultural industry.
Colorado Ag Ed Standards/ Competencies / AGB 11/12.04 The student will understand the influences of agricultural economy and its influences on the overall economy.
AGB 11/12.04.13 Understand the futures market.
Student Learning Objectives / Upon completion of this lesson the student will be able to:
  1. Differentiate between cash and futures markets.
  2. Define the futures market and its functions.
  3. List the different futures market participants.

Time: / 50 minutes
References and Resource(s): / Colorado Agribusiness Curriculum


Instructions, Tools, Equipment & Supplies / Normalwords are instructions to the teacher;Italicized style text is suggested script.
Problems and Solutions Sheets
BFW Futures Market Powerpoint
(5) 11X17 pieces of paper
Pictures of cash and futures markets – enough for several groups
Futures market participants signs
Copies of Wall Street Journal or computers for students to access
Copies of Commodity Challenge book part 3
Introduction/Context / How many of you have family members that trade contracts on the futures market or sell commodities on the futures market? How many of you think you will ever utilize the futures market? Today we are going to take a look at how the futures market works, and why agricultural commodities are traded through the futures market.
Interest Approach/Motivation / Who can tell me what the golden rule of making money is? How about making money in the futures market? Buy Low and Sell High!
Lesson Body and Content
Objective 1: / Objective 1: Differentiate between cash and futures markets.
Break students into groups of 3 or 4. Give each group a flip chart or poster and a stack of pictures of various markets.
Please split your paper in half. Half of your paper will represent cash markets, the other half will represent futures markets. Place the pictures provided into the appropriate category. What questions are there? Go
Why did you place these pictures under cash market and these under futures market?
How many of you sold fruit last semester for FFA? Explain to me how the fruit sale worked? Who did you sell the fruit to? What price did they pay? Where did you get the fruit to sell to them?
Even though you may not have realized it, your FFA fruit sale was similar to the futures market. You sold the fruit at a higher price to customers, turned your order into the company, and bought the fruit at a lower price than you sold it at. Following the rule “Sell high, buy low” you turned a profit on your fruit sale.
Now I want you to consider this situation. With a partner, read the following situation and discuss what the benefits and challenges might be.
Objective 2: / Objective 2: Define the futures market and its functions.
Journal Advocate headline reads: “Moisture below normal: supply of corn to decrease.” Limited rainfall out here on the plains could decrease the supply of corn, increasing the already high prices. As a cattle producer, this headline reads disaster for you because you’re already paying way more to feed your cattle than expected, decreasing your profit margin. You’ve looked into alternative feeds, but nothing seems to give you the same feed to gain ratio as corn. Since the farmer’s almanac doesn’t show any moisture coming in the near future, you decide to buy a corn futures contract before the price of corn goes even higher.
With the person next to you, discuss why a producer might do this, and what some of the benefits or challenges might be.
Today we are going to focus on the futures market. You will find out who the participants are, what the futures market can do, and how it differs from the stock market.
Once students have done Think-Pair Share hand out copies of futures market section of Commodities Challenge Book. Hand out problems sheet with questions for the students to find answers for.
Objective 3: / Objective 3: List the different futures market participants.
The students should be able to meet all three objectives by doing the Go Get It (finding the information in the Commodity Challenge Book). This activity is for review.
Lay the broker, hedger, speculator signs and clues in the middle of the classroom. Instruct the class that they have 2 minutes to match up the clues with the correct futures market participant and tape them to the board. They can ask their classmates who do not have signs for help or advice as to where the signs need to be placed.
Once the students have placed the signs and clues on the board, go over them as a class to ensure that the clues are placed under the correct participant.
Review, Summary or Closure / Let’s quickly review the past two days.
  1. What is the different between a cash market and the futures market?
  2. What are some examples of each?
  3. What is one function of the futures market?
  4. What are the other functions?
  5. Who are the main participants of the futures market?
  6. What is the difference between speculators and hedgers?
With the futures market having such a huge influence on agriculture its important to understand what kind of commodities are traded on the futures market, and how forward contracts, or futures, are set up, and how they are traded. You’re next task will be to research the commodity of your choice.
Application - Extended Classroom Activity / Have students research a commodity on Have them research where the commodity is produced, where it is used or traded, what the commodity is used for and what the distribution chain is from beginning to end.
Application-FFA Activity
Application-SAE Activity
Evaluation or Assessment
Evaluation Answer Key or Scoring Rubric/Procedure