Protect against the bear, but leave the barn door open for the bull.

That's the marketing attitude of two sets of western Corn Belt growers. Both have plans in place to take home decent profits while being protected against low prices that have lingered much too long.

Duane Witt has always taken pride in being good at marketing corn and soybeans. But with the StarLink fiasco and other issues facing growers, he and his brother, Gail, felt the majority of marketing was best left up to a pro.

And why not? In a year in which corn prices are in a continuous slumber, they'll earn an additional 30¢/bu on part of their crop. They also have a plan to pocket another 20-30¢ if prices rally into harvest.

The Witts farm in Beebeetown, IA, just north of Council Bluffs. They grow about 4,500 acres of corn and soybeans on a 50-50 rotation. “In the past, we used forward contacts for grain we didn't have room to store,” says Gail. “We would get to the elevator early and not face as many discounts during the peak of harvest-time deliveries.”

But with low prices the past few years, that strategy has been used less and less. The Witts turned to Allendale, Inc., an Illinois-based marketing service they learned about at a regional marketing seminar. “We wanted a service to help us do a better job of marketing,” says Duane. “We signed up with Allendale, and immediately got part of our corn sold at a good price.”

That marketing move amounted to selling Dec. '01 corn futures at $2.39 on about 25% of the projected corn yield. That was in late winter. Prices then started another downfall, plummeting to $2.10 or even lower. The $2.39 futures were then bought back at the lower price, providing a 29¢ profit.

“To recapture additional profits from those hedges, we bought $2.40 call options in the event the market rallies,” says Duane. The cost for the calls was about 19¢/bu, but they will recover that with a price rally if it occurs.

The Witts also have plans in place to sell an additional 25% if December futures jump to $2.45 and another 25% if they climb to $2.50.

Darrel Good, University of Illinois (U of I) grain marketing specialist, sees more growers using outside marketing sources and contracting.

“In terms of looking at marketing help, producers are going in two different directions,” he says. “Some are looking at advice and help in deciding on when to pull the trigger. Others are using indexing contracts where they commit a fixed number of bushels priced on a formula.

“In this more passive way of marketing, growers use price averaging within a period where they take the median price from say March to July.”

Average price contracts are helping Randy Rasmussen bank a little profit, as are initial new-crop corn sales made as early as November '00.

The Fremont, NE, grower farms about 1,800 acres of corn and beans with his father, Roland, just northwest of Omaha. In their average price contract with ADM, sales are made in 5,000-bu increments.

“In this program, we'll receive the average price of corn between March 1 and June 28, a period which normally sees the year's best prices” says Rasmussen. “We expect to see at least a 20¢ premium from this program.”

That marketing strategy was part of his plan to have 25% of his corn sold before planting. Most of that was made in forward contracts with the local elevator for fall delivery.

“We made our first sales at $2.15/bu on Nov. 27 of last year,” says Rasmussen. “We then made additional sales when prices increased by 5¢. Sales were made at $2.20, $2.25 and $2.30 entering January of this year.”

Again, with bean prices below the $5.20 loan rate, there was little opportunity for locking in profits. That could change if the price of beans rallies into early 2002. Rasmussen is not shy in using futures or options to lock in a good corn or bean price far in advance.

“If corn or beans see rallies and there is a chance to secure a good price for next year's crop, we'll make some sales extremely early,” he says

“Extremely bullish” was the attitude of the Witts' consultant Bill Biedermann in early June after days and days of rain and cool weather across much of the Corn Belt slowed early plant growth and delayed some planting.

“The (early June) crop report rated the corn crop at 47% good (or excellent), compared to about 64% good last year,” says Biedermann.

That set the stage for continued lateness of both corn and beans, he contends, and could keep the corn crop under 9 billion bu. A smaller crop is coupled with wheat stocks some 40% below two years ago, Biedermann says, and he believes both corn and beans could easily see rallies into the fall. He suggests a call options strategy to take advantage of price jumps.

For example, in June, a $2.30 March '02 corn call could be bought for about 15¢/bu. That left the grower open to a price rally above $2.45 ($2.30 + .15). Similar strategies might be appropriate this fall, as well as for the 2002 crop.

“We think it's best to sell production when you can lock in a profit, but still be open to the upside with options,” he says, adding that $2.50-2.60 Dec. '02 corn would certainly be a viable target, along with bean prices if they go substantially above the $5.20 loan.

“All farmers need to cut a fat hog when they can,” he says, “but they need to lock in a meal to live on. Options can help you do that.”

U of I's Good agrees that growers should consider using options to lock in corn prices that surpass the loan rate. “With the reduced acreage, there may be chances to push corn prices higher,” he says. “But it appears that beans are going to be sub-loan as far as we can see.”