Harvest is here and the time is right to discuss marketing and storage opportunities. However, before we address these important issues, allow me a moment to, er, gloat.
In my last column, I put forth an opinion that grain prices would make an early low. That was four weeks ago and, since then, corn and soybean prices are about 10% and 20% higher, respectively. It is not often that I make a bold market prediction and my prediction is spot on.
I will quit gloating now.
Concerning your post-harvest marketing alternatives, my thoughts are straightforward. In corn, the carrying charge from Dec’20 to Jul’21 is nearly 20 cents. I would like to sell July futures (or HTA) against corn held in storage. Between an improved corn basis next spring/summer and the board carry, you can add 30 cents or more to your harvest price. And, of course, there is no risk of lower prices.
Are you considering unpriced corn in storage? I tell producers that it is best to “forget last year” in marketing decisions. However, I can’t help but remember the disaster of unpriced grain in the first half of 2020. I say yes to some (25% or less) unpriced corn in storage, but don’t put all your eggs into this basket.
Cash soybean prices are up over $1.50/bu. since early August – these are the best cash prices since the trade war began over two years ago. With an inverted futures market, the storage hedge (i.e., store soybeans and sell May or July futures) is off the table. How about selling soybeans now and re-owning with call options? Maybe, but I have a different idea. Don’t be greedy - sell your soybeans on this rally. Worried about the price going higher? You have plenty of upside potential in your 2021 crop.
My admonition, “don’t be greedy,” reminds me of another time when I made a bold and correct call on the market (BTW, my list of great market calls is painfully short). I was trading in the pit of the MGEX in the 1980s. A colleague called one morning, seeking my keen market insights. I was pumped-up on coffee and bearish when I said, “I think the wheat market could drop 25 cents in the month ahead.” That day, prices dropped 12¼ cents. The following day, prices dropped another 13 cents, for a two-day decline of 25¼ cents.
That afternoon, I took another call from my colleague. He was astonished. “I can’t believe it – the market is down 25 cents, just as you predicted. You nailed it. Now what do you think will happen?” I replied, “No more predictions. You get one good call a month. Don’t be greedy”
At the risk of repeating myself, soybean prices are up 20% in four weeks and stand at their highest level in nearly 2½ years. Rallies like this must be rewarded. Don’t be greedy. Make sales and hope like heck that the market keeps rising because the 2021 crop is enough worry.