Ed Usset

Ed
Usset
Marketing specialist,
University of Minnesota Center for Farm Financial Management
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Ed Usset is a marketing specialist at the University of Minnesota Center for Farm Financial Management. he authored "Grain Marketing is Simple (It's Just Not Easy)"; helped develop "Winning the Game" grain marketing workshops; and leads Commodity Challenge, an online trading game. He also blogs about grain marketing at Ed's World
Ed also writes a monthly column for the print edition of Corn+Soybean Digest.

Articles
Short Crop Pricing?

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.

Inverse Market Options 1

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.

Drought Marketing

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.

Hedging with an Opinion

Last month I explored the hedging practices of merchandisers, exporters and processors, and how it is more than avoiding risk. These are basis traders who employ the purest form of hedging - placing long and short hedges regardless of price expectations or market opinion.

Hedging is More than Avoiding Risk

My course on “Agricultural Futures and Options” is 15 weeks of painfully dull lectures. With glassy eyes, my students endure talks on basis and carrying charges, speculation and spreading, balance sheets and options. Of all the topics covered, however, none is more important than hedging with futures contracts.

More Big Changes in Canada

Change is coming to the Canadian Wheat Board (CWB) and with it, big changes for grain producers and the entire grain-marketing system in Canada. Predicting change is perilous territory. I’ll take a shot.

Big Changes in Canada

Last spring, the newly elected government in Canada announced its intention to do away with the Canadian Wheat Board (CWB). Even though the CWB operates as a marketing system for different commodities (wheat and barley) in a different country, this will impact corn and soybean markets. I’ll use the next two columns to tackle this question, starting with a little background and some reflections on my own dealings with the CWB.

Worry… And Opportunity

Turning the page on a new year should be a time for hope and renewal. But all I got are worries. Here’s one worry: price direction. Do you remember the great September market collapse in grain prices? In hindsight, that was a warning shot across our bow that said “the bull market is over.”

Have the Rules Changed?

Did somebody change the rules? Look, for example, at corn and soybean prices. Since when do bull markets last a year? And since when do two incredibly strong bull markets repeat just three years apart, as they did in 2007-2008 and 2010-2011? I think somebody is messing with the rules.

Old- And New-Crop Challenges

For many months, the futures market for corn has been inverted – at times more than $1/bu. – from the July 2011 to December 2011 contracts. An inverse from old-crop to new-crop futures is not rare. They occur in crop years like 2010-2011, when ending stocks at year-end are tight.

Try This Perspective

Bull markets are a source of joy or heartache, depending on the approach taken to price grain and your current position in the market. It is joy for the farmer with unpriced grain in storage and nothing priced for 2011 or beyond. It can be heartache for the proactive marketer who stepped up to the plate and swung early and often at pricing opportunities that today look cheap.

One Big Bull

In the words of the great Yogi Berra, “It’s déjà vu all over again” – the current bull market looks more and more like the run-up of 2007-2008. It’s a good time to review the record of bull markets and look for the factors that could bring it to an end.

What Are You Waiting For?

What is your exit plan? I’m asking this of you, the producer, who placed newly harvested and unpriced corn and soybeans into storage last fall. What price are you waiting for before selling grain held in storage?

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