Marketing 2003 soybeans has been a tough call for Dave Peckenpaugh, Randy Hervert and other growers. Hervert managed to maintain his sanity by getting much of his crop sold before the summer plunge. Peckenpaugh is depending on one last preharvest spike in the market to get his soybeans marketed.

Hervert farms near Ravenna, NE. His more than 300 acres of beans are part of a corn and wheat rotation. Peckenpaugh has about 200 acres of beans in his mainly corn, wheat and sorghum program in the northern Texas Panhandle community of Farnsworth.

When USDA reported higher bean stocks and well-timed summer rains fell over much of the bean belt, the situation drowned prices that had remained fairly strong for several months. But Hervert already had 50% of his crop forward contracted and more protected by a futures position.

“I forward contracted about half my crop in May for $5.34/bu.,” he says, noting for the past two years he has depended on a marketing service to handle that end of his operation.

Much of May saw November '03 soybeans futures prices in the $5.40-5.80 range. It was from that range that Hervert got half his crop contracted by his local crop consultant, Dale Schultz, a representative of Brock & Associates. Another 30% was secured with a September $5.93 futures contract.

Fortunately, those moves were made before USDA increased its production estimates to 2.85 million bushels, up from about 2.73 billion last year. This year's November futures price spiked to above $5.85 in mid-June, then proceeded to take a 20¢ dive, and eventually dropped 50¢ as USDA stocks turned up more supplies on top of timely rains.

Peckenpaugh, who normally sells his beans to a Wichita, KS, feed mill, says he missed the better marketing opportunities by not pulling the trigger fast enough. “There were early forecasts of tight supplies and production, and I wanted to wait until we saw a little better basis than is often seen here shortly before harvest,” he says. “Now I'm probably going to sell November futures when there's a market increase, then still try to deliver when the basis tightens up.”

With the nearby hog production market, his basis is about 40¢ under futures. He feels that will tighten by about 10¢ as harvest approaches.

“Unfortunately, it looks like we will be depending on an LDP for beans (as prices linger at the loan rate or below),” he says. “I hope to get futures sold at a higher rate, then be able to add the LDP to additional income that may arise.”

LDPs are also distasteful to Hervert, whose region sees a basis in the 40-45¢ under range. But with his crop protected at prices much higher than what cash will be at harvest, any LDP will be additional gravy to already stronger selling prices.

Richard Brock of Brock & Associates, the Milwaukee, WI-based commodity-marketing service, was bearish soybeans in late spring and has been an aggressive seller. He believes there may still be some opportunities to market beans before harvest at higher levels, and says rallies need to be sold.

“If a farmer has nothing sold, he should be forward contracting soybeans if the price is above his local loan rate (likely in the $4.80-5 range), or hedge them in the futures,” says Brock, also marketing editor for The Corn and Soybean Digest. “Odds are high that prices will be under loan rate at harvest time, which puts farmers back in the LDP game.

“The strategy will then be to pick a bottom in the market to both lift hedges and collect LDPs. Prices should then rally into year end, giving farmers an opportunity to wrap up cash sales,” he says. “It's important in the year of a major bear market to be an aggressive forward seller and hedger. By doing so in a year like this with LDPs, farmers should be able to net $5.50 or higher for their beans.”

Earlier moves by Brock's grower customers should produce positive returns. In late May, Brock recommended that growers cash contract 30% of their crop at about $5.53, a central Illinois price. On June 26, an additional 20% of the crop was cash contracted at $5.35. In addition, 20% of the crop was protected by selling $5.93 Sept. '03 futures. And another 30% was covered by an options strategy that locked in a $5.03 floor.

Wayne Purcell, Virginia Tech University professor of agricultural and applied economics, blames much of the major mid-summer soybean price drop on a market correction.

“The market made a rather complete correction of the run-up that started earlier in the year and ran up toward the $5.88 level,” he says. “There will be better opportunities to place or replace short hedges in this (new-crop bean) market, so let's give the market a chance to rally to the $5.45-5.50 range of the November futures and look at price protection at that time.”

Brock sees a chance for price increases after harvest because of continued strong export demand for U.S. soybeans.

“USDA boosted projected '03 soybean production by 30 million bushels,” he says. “However, all but 10 million bushels of that supply increase were offset by stronger demand projections. Strong advance sales of new-crop U.S. soybeans, especially to China, led USDA to boost projected '03-'04 exports by 30 million bushels. The projected crush was also upped by 5 million.”

Peckenpaugh hopes periodic rallies occur to enhance his late marketing capabilities. Hervert is just happy to have most of his marketing out of the way so he only has to worry about producing a solid crop.