Corn, soybean marketing programs helps grower take advantage of sell signalsCorn, soybean marketing programs helps grower take advantage of sell signals
Think DifferentMichael Slack is taking a more diversified approach to getting his corn and soybeans marketed. He’s leaning on two separate entities: one for its advice and the other for grain contracting programs. One segment pools grain with other bushels to demand a better price from big buyers, while the other offers the Kansas grower periodic sell-period notifications.
November 7, 2014
Michael Slack hopes one old and one new marketing program will help him bolster still-weak corn and soybean sales heading into 2015. He’s searching for a soft landing after being caught between a weather-related rock and a hard place.
Slack wasn’t alone when his south-central Kansas farm couldn’t catch snow or rain the first five months of 2014. He feared committing many bushels for sale, even though grain prices remained strong early in the year. “I wanted to forward contract more grain, but with our weather, we couldn’t tell what type row crops we’d end up with,” says Slack, of Oxford.
Sure enough, it started raining in May. That enabled him to produce bumper corn and a reasonable bean crop, but not before corn prices plunged to near $3 per bushel and beans dipped to $10.
“Marketing has always been a struggle,” Slack says. “Experiences we faced this year caused us to turn a lot of the marketing over to others.”
He and his wife, Janice, have used marketing advice from Roach Ag Marketing the past 10 years. They’ve added large grain handler Scoular Co. to their marketing program for 2014–15.
“It’s diversified marketing that hopefully will help us capture higher markets for this year’s crops and get good prices locked in for 2015,” Slack says. “We are placing a portion of our production in programs offered by RoachAg and Scoular.”
Roach Ag provides a marketing tool called Sell Signals, designed to help farmers know what are likely the best times to make staggered sales. These signals help growers “know when to pay attention and when to be patient with your grain marketing,” says Andrew McCarty, analyst for Roach Ag Marketing, headquartered in Florida with offices across the Corn Belt.
“A sell signal is a peak in the market, kind of like a digital thermometer,” McCarty says. “When it’s ‘hot,’ we think a farmer should be paying attention to prices. When it’s ‘cold,’ it’s time to be a buyer or sit on the sidelines and wait patiently.”
He says there are typically 10-12 sell signals a year for corn, soybeans and wheat. “Each sell signal lasts an average of four to six days, or sometimes fewer days in down-trending markets,” McCarty says. “Farmers receive sell signal alerts through an automated phone call and email. They are notified on the first day of the sell signal. We advise them to consider making several sales within the four- to six-day period.”
Sell at price peaks
Of course, there are no guarantees in commodity marketing. But the program is designed to help farmers sell at price peaks, which normally occur the first half of the marketing year between February and July.
“A farmer can look back at the marketing year to see that he sold at a high average price for the year,” Slack says.
Roach Ag President Brian Roach says that in the 2014 sell signals program, the average corn price to farmers was $4.66. The average soybean price is expected to be about $11.75, McCarty says, adding that the program should help take the guesswork out of making sales for 2014 production held into 2015.
“For corn, we believe these cheaper harvest-time prices (likely in the $3-$3.50 range) will lead to reduced planted acres,” Roach says. “We also expect a weather worry. Both of these may lead to higher corn prices and opportunities to get some old 2014 crop sold, as well as selling opportunities for 2015.”
Slack uses the ProHedge marketing program with Scoular. It enables farmers to commit specified amounts of grain to the grain handling company. Scoular then pools it with other grain to make bulk sales, says Mark Knight, head of the Scoular ProHedge program in Overland Park, Kan.
Slack plans to commit bushels of corn and soybeans to his local Scoular elevator in the Oxford area. “Scoular has the specialists to market it,” he says. “I have done it with wheat and will designate some corn and bean bushels for the pooling program.”
Knight says the program operates similar to cash contracts from other grain handlers. “But ours is managed by a team of seasoned professionals,” he says. “Scoular combines all bushels throughout the company and uses futures and options to enhance the hedge price.”
The corn and soybean trading period is January through September. Wheat is Sept. 15 through June 15.
“For this year’s ProHedge pricing, which ended Sept. 12, the average price for soybeans was $11.86,” Knight says. “It was $4.50 for corn. We priced most of those bushels in the spring, when we had the highs.” He notes that in about 75% of cases, spring is the time to sell corn and beans, when prices are seasonably higher. “But there can be times when there is a drought, in which case prices are higher at harvest and supplies are cut short,” he notes.
Knight says ProHedge and similar programs should be part of “diversified” marketing tools considered by growers. “A good start would be to consider this strategy on 10-15% of your bushels to help get yourself diversified,” he says. “After the good price averages we saw for our 2014 sales, we expect some farmers to commit a higher percentage of their expected production to the program.”
He points out that if prices rally in their seasonal pattern early in 2015, the program can help provide better markets for 2014 corn and beans. “We can do it for old crop and new crop bushels, but farmers will not get a final price until September of next year.”
Slack adds that some of his corn, which yielded from 140 to 180 bushels across nine different fields, was sold at the harvest price of just over $3.
“Then, I bought call options to take advantage of potentially higher prices,” he says. “We like the fact that we have several types of marketing strategies in place. With these programs, we’re tapping into someone’s expertise. We’re spreading our risk.”
He believes that using a local or national grain handling company or co-op, as well as regional or national market analysts, should benefit other farmers.
“We use a banker’s expertise for financing and an agronomist to help with production,” he says. “Why not count on analysts for marketing?”
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