Seasonal price patterns suggest that corn prices will likely peak in early July. But with recent price patterns caused by drought, bullish oil and other factors, will that be too early or too late to book much of the 2013 crop?
November soybean futures have seen little movement since late April; soybean prices have ranged from $11.90 to $12.40/bu. They closed Monday (May 13) at $12.09. And with USDA’s projected average season prices as low as $9.50, beans in the teens and even $12 prices may soon be history.
Old-crop corn likely hasn’t seen it’s bottom, even after a $1/bu. cave-in following the bearish grain stocks report March 28, warns Ed Usset, University of Minnesota grain marketing specialist. Usset’s book, "Grain Marketing is Simple (it's just not easy)," examines the difficulties in knowing when to make grain sales. It couldn’t be more relevant than now.
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.
USDA has lowered the projected high-end season-average farm price for corn down to $6.75-7.45/bu. It’s a 20¢/bu. drop from last month – a trend farmers hope doesn’t continue as planting time nears. The projection came in Friday’s World Agricultural Supply and Demand Estimates (WASDE) report, which also showed tight ending stocks unchanged at 632 million bushels.
While locking down revenue crop insurance may be top of mind, farmers also should look hard at marketing 25-30% of their soybeans before planting, says Chris Hurt, Purdue University Extension economist and grain marketing specialist. The $12.87/bu. insurance floor for soybeans was determined by the February Chicago Board of Trade November 2013 soybean futures contract price.
Despite market volatility that can easily see corn and soybean prices swing 30-60¢ a day, February’s projected 2013 soybean-to-corn price ratio is only slightly higher than for 2012. Gary Schnitkey, University of Illinois economist, says based on futures settlement prices the first half of February, the projected price for corn will be $5.73/bu. The soybean price is pegged at $13.01/bu. That equates to a soybean-to-corn price ratio of 2.27 ($13.01 / $5.73).
With new-crop corn and soybean futures markets priced for profit, farmer Rod Pierce takes full advantage of revenue crop insurance. He makes substantial grain sales in addition to guaranteeing income on 75-85% of his production.
While the northeast is knee deep in snow after this weekend, Corn Belt farmers are hoping for any moisture to build any kind a soil profile at least get ground ready for planting. A renowned climatologist forecasts that they’ll get their wish.
The South American soybean crop is still looking big. But drier-than-expected weather has some fearing Argentina’s production could be slowed, a sign that is helping bolster an “awfully strong soybeans market” for U.S. growers, says Dan O’Brien, Kansas State University grain marketing economist.
For farmers who got sucked into questionable multi-year corn and soybean marketing in the mid-1990s, talk of the 2013 fiscal cliff would be just a speed bump. Not only were there massive losses, some wound up with heavy fines and even jail time. Unsecured hedge-to-arrive (HTA) contracts mismanaged by elevators, market analysts and farmers caused the stench.
Grain marketing clubs come in all shapes and sizes. With so much money on the table, most farmers need all the information they get on making crop sales, trends that impact prices, whether China is still calling the shots or whether Texas feed yards will still pay $8 for corn.
Using subsurface drip irrigation, Nebraska farmer Don Anthony has maintained big corn and soybean yields while improving his watering efficiency by 35% or more. Like many western Corn Belt and southern High Plains growers with limited annual rainfall, Anthony has counted on irrigation as a staple for his corn, soybeans and other crops.
Despite the recent USDA grain stocks report projecting bullish prices for old-crop corn, there are signs that high prices are crippling regional livestock feeders who rely on Midwest corn for some 60% of their grain rations.
Still leery of using futures after such debacles as MF Global and Peregrine Financial? Are you unsure of how futures contracts truly function? A mini-corn or mini-soybean contract can provide some real-life futures trading lessons without manufacturing a major margin call.