I like to think of grain marketing as a game played with two halves. The first half is pre-harvest marketing, or pricing actions taken before you harvest the crop. The second half occurs after harvest and involves a question, “To store, or not to store?”
July makes the corn crop. In 2003, despite a dry August and September, a corn crop with great potential still ended up good. August makes the soybean crop and, in the same year, a soybean crop with equally great potential at the end of July produced the worst yield in ten years. Does this sound familiar? While I don’t believe the dryness in 2013 has been as extreme, in terms of the timing and trend in crop conditions, it’s 2003 all over again.
The game has changed. After months of fighting for a dominant position, market bears took control of the corn market in July. Now harvest looms, and you need a game plan to deal with lower prices. How should you price new-crop corn and soybeans? Let’s look at carrying charges, basis and seasonal price patterns after harvest.
CSD columnist Ed Usset, University of Minnesota, spoke to farmers at Commodity Classic on March 2. His topic: post-harvest marketing for corn and soybeans. Usset used fictional characters to show different marketing styles and the results from those styles, whether you sell the carry, have no storage, etc. He also talked about sizing up the market. His biggest reminder to attendees, and all crop marketers: Forget last year!
CSD columnist Ed Usset, University of Minnesota, spoke to farmers at Commodity Classic on March 2. His topic: post-harvest marketing. Usset used fictional characters to show different marketing styles and the results from those styles, whether you sell the carry, have no storage, etc.
CSD columnist Ed Usset, University of Minnesota, spoke to farmers at Commodity Classic on March 2. His topic: post-harvest marketing. Usset used fictional characters to show different marketing styles and farming types. He also went over carrying charges and what those mean for different marketing styles.
Old-crop grain prices have tread water for months. Many traders believe that a market that cannot establish a clear uptrend is a market poised for a setback. I don’t agree. Old-crop corn and soybeans prices will hold steady and trade higher in the next few months. I read the same bearish news that you do. Let’s walk through the problems.
Talk of the fiscal cliff wore me down. It reminded me of the buzz surrounding Y2K at the new millennium. What happened on January 1, 2000? The sun rose in the East and I had a cup of coffee. Life as we know it continued to march forward. I expected the same from a fiscal cliff.
Every new year is an opportunity to wipe the slate clean and look to the future with a fresh eye. Higher and higher land prices indicate that grain production has been a good way to earn a living over the past few years. But as I look forward I have questions.
With a nod to jolly St. Nick, I’m going to double-check my own naughty and nice list from another incredible year in the world of corn and soybeans. In January, I wrote of worry (naughty) and opportunity (nice). Naughty was a market searching for direction in a world with some enormous economic problems. Nice was new-crop grain prices above production costs. Sound familiar? With a new year just weeks away, the same worries and opportunities remain on my list.
USDA reports confirm a poor corn crop. Relative to trend-line yield expectations, I consider 2012 one of the five worst years in the last century. We started the current crop year with the lowest corn supply in a decade. On the demand side, something has to give, and the pace of exports has plummeted. But feed and ethanol demand is surprisingly resilient. The net result is a projection for even tighter ending corn stocks by next summer.
What type of market are we facing? Is the main feature of this market the butt-kicking drought that started the current crop year, or is it the tight stocks that will end it? The answer might help me do a better job in pricing.
Harsh droughts are not fun. And, relative to expected yields, the 2012 corn crop will go down in history as one of the five worst in the last 100 years. Drought-damaged crops and early harvests go hand in hand. Maybe this is for the better – finish harvest quickly and put this year of disappointment in the rearview mirror.
This year has all the signs of producing a corn crop that could fall short of trend-line yields by 20% or more. I call this a butt-kicking drought.
Our last butt-kicking drought occurred in 1988. Yields were about 25% below trend. The drought of 1983 was nearly as severe. Beyond these years, we have to go back to the Dust Bowl. In 1934 and 1936, corn yields fell 30% short of trend.