“Know them and respect them. But don't let seasonal trends be your only pricing guide.” That’s Ed Usset’s advice about historic corn and soybean price trends. Except for Corn Belt drought years like 1988, 1995 and 2012, you’re more likely to see higher prices for corn and beans in March through June than from July on, says the University of Minnesota Extension grain marketing specialist. Today’s price volatility, however, creates massive spikes in prices that can provide great marketing opportunities virtually year-round.
Dwayne Beck admits right away that his farm “is research.” Why else would he alternate alfalfa with continuous corn? Say what? That’s a sampling of the different farming approach he takes at the Dakota Lakes Research Farm, Pierre, S.D. The producer-owned farm, also part of South Dakota State University’s ag research program, is led by Beck’s no-till-or-nothing approach. He takes conservation farming to the next level.
It was mid-July and corn jumped $2/bu. over early June. That $7.40 would yield a sweet profit. But drought-driven $9 was “guaranteed” around the co-op coffee pot. Your co-op buddies just knew it. So did some pro analysts. When it pegged at $8.40+ about Aug. 10, you weren’t going to be the one who sold too soon. And in late September, when corn was back down to $7.40, you were still unsold. And you still weren't when it rebounded after the mid-October crop report and closed at $7.65 on Oct. 19.
Does marketing your corn or soybeans drive you nuts? Does pulling the trigger cause you to break out? Like it or not, marketing and prudent risk management is as important as making a good crop. For farmers with little marketing discipline, a decision grid can help solidify their risk-management program, says Carl German, University of Delaware Extension grain marketing specialist. He helped lead a USDA Northeast Center of Risk Management Education program to devise a marketing decision aid several years ago.
“Don’t pull a VeraSun.” Illinois Extension Economist Scott Irwin’s warning is for growers who may teeter on economic catastrophe if they pay high prices for fertilizer or other inputs without matching them with corn or soybeans sales. His reference to the bankrupt biofuels company – which apparently failed to hedge against grain it purchased – illustrates the enormous financial risks farmers take.
A new Risk Management Agency (RMA) program could minimize the misery for Hoosier Brian Kemper and thousands of other growers who have suffered through the dire-straits drought that rivals the anguish of 1988.
When you farm 35,000 acres in five states, balancing input purchases with crop pricing can boost the bottom line. But a leading indicator to make one of those trades may not keep you from lagging on the other in the decision-making process. That’s Donny DeLine’s attitude. He doesn’t always market the same percentage of corn or soybeans to match production with inputs bought. But if both ends of the spectrum look good, he takes action. In fact, early fertilizer purchases and bulk buys last summer helped him save 20% or more over prices this spring. And by booking corn early, he had almost 50% of it priced at $6 or higher.
Huge market rallies in late June saw December 2012 corn jump from $5.05/bu. to $6.44 within two weeks. They swelled 40¢ on June 25 – hello limit-up – on the back of Corn Belt drought fears. They blew through $6.20 on June 26 and $6.40 on the 27th. And by mid-July, the price-surging weather market shot Dec corn to $7.80.
Are the fundamentals surrounding soybeans causing prices to surpass expectations? At least one Corn Belt grain marketing specialist thinks so. And it could be a signal for you to sell more beans this spring. Price volatility can take the life out of a market in a flash.
HTAs can be a marketing tool that offers the benefits of hedging without threat of a margin call. But many think first of the hedge-to-arrive fiascoes in the mid-1990s. They are among a range of forward contracts offered by grain elevators, ethanol plants and other grain buyers, says Melvin Brees, University of Missouri Food and Agricultural Policy Research Institute (FAPRI) economist.
Expect to spend more time babysitting the crop, say agronomists and seasoned continuous corn farmers. Devote extra time to in-season N, disease and insect management advises John Kretzmeier, Fowler, IN. He was all continuous corn until the last two years, when drainage on his flat land became too problematic for all but about 20% of his ground.
By installing small check dams within drainage ditches beside fields, research shows that growers can stop close to 30-50% of the nitrate nitrogen (N) from flowing downstream, according to Mississippi State University (MSU) studies.
You want to insure against a wreck in grain prices. But you may not want to be locked into straight futures or cash forward contracts, or pay the high price of a put-option premium. An options spread, or “fence,” may be the answer.
John Story had about 25% of his expected 2012 corn production marketed by March 2011, two months before the government’s intentional explosion of a Mississippi River levee that flooded his fields in southeastern Missouri. Despite the worst disaster in his region’s history, the deep water didn’t drown his spirits as he geared up for even stronger grain sales this year.