March 10, 2013
With early prices for 2013 crops at levels likely above projected breakevens, it may be time to get a few bushels booked, says Ed Usset, University of Minnesota grain marketing economist. Usset recently established his annual preharvest corn and soybean marketing plans. While he believes futures contracts normally provide more marketing alternatives to growers, he doesn’t discard cash contracts in his early marketing plans.
“The purpose of these plans is to get people to start thinking about early marketing,” says Usset, also an economics trend advisor for Corn & Soybean Digest. “It’s not a one-size-fits-all plan. But I want people to look at what I’m doing and ask themselves if and how it would work on their farm.”
Consider early corn sales
Usset’s plans are based on a fictitious farm with 600 acres of corn production and 530 acres of soybeans. For the 600 acres of corn, expects production is 90,000 bu., or 150-bu./acre yield. He again buys crop insurance to protect production risk, and hopes to have 75% of the anticipated crop priced by mid-June.
His initial and expected corn sales include:
Priced 10,000 bu. on Jan. 2, using $5.92 December 2013 futures.
Priced an additional 10,000 bu. on Jan. 2, using $5.92 December futures.
Price 10,000 bu. at $5.80 cash or $6.30 futures by April 25, pricing tool TBD.
Price 5,000 bu. at $6.20 cash or $6.70 futures by May 9, pricing tool TBD.
Price 10,000 bu. at $6.60 cash or $7.10 futures by May 23, pricing tool TBD.
Price 10,000 bu. at $7.00 cash or $7.50 futures by June 6, pricing tool TBD.
Price remaining 10,000 bu. at $7.40 cash or $7.90 futures by June 20, pricing tool TBD.
Usset says growers should ignore decision dates and make no sale if prices are lower than $5 cash or $5.50 December futures, and to exit all options positions by mid-September, 2013.
Of course, potential drought will likely have the biggest impact on corn and bean prices. Timely spring and summer rains could send corn to $4 and beans below $9 or $10. But another year of extended dry periods could push corn toward $8 or higher and beans back well into the teens.
Usset remains concerned that drought will return. However, some marketing shouldn’t be on hold. “It is time to get started,” he says.
Schedule soybean trades
In his soybean plan, expected 2013 production is 24,000 bu., a 45-bu./acre yield. “My objective is to buy crop insurance to protect my production risk and have 75% of my anticipated soybean crop priced by mid-June,” he says.
His initial and projected marketing trades include:
Priced 2,500 bu. on Jan. 2, using $12.94 November 2013 futures.
Priced another 2,500 bu. on Jan. 2, using $12.94 November futures.
Price 2,500 bu. at $12.50 cash or $13.30 futures by April 25, pricing tool to be determined (TBD).
Price 2,500 bu. at $13.20 cash or $14 futures by May 9, pricing tool TBD.
Price 2,500 bu. at $13.90 cash or $14.70 futures by May 23, pricing tool TBD.
Price 2,500 bu. at $14.60 cash or $15.40 futures by June 6, pricing tool TBD.
Price the last 2,500 bu. at $15.30 cash or $16.10 futures by June 20, pricing tool TBD.
“Luckily, price opportunities were still well above breakeven costs when I made my first two sales for 2013 at $12.94 using futures,” Usset says.
In his soybean strategy, he advises growers to ignore the listed decision dates “and make no sale” if prices are lower than $11.10 local cash price or $11.90 November futures. “Exit all options positions by mid-September,” he advises.
About the Author(s)
You May Also Like
Current Conditions for
Enter a zip code to see the weather conditions for a different location.
Pros and cons of H-2A guest farmworkersNov 30, 2023
Market expectations: What's on the horizon for grain and livestock?Nov 22, 2023
18 gifts for the farmer on your listNov 27, 2023