Grain Marketing: Unheard of Prices May Cause Marketing Paralysis

No new news to speak of on expectations for a 2012 corn and bean harvest. “It was hot and dry” for an extended period of time in the major world corn production region. I’m guessing this will lead to continued price volatility. Soybeans are a similar story – except – the U.S. has competition in the other hemisphere when it comes to world domination in this market. If you were farming in Brazil, Argentina, or any S.A. farm community – what would you be planning to do? If it were me – I’d be going all out to make a record planting and hope for a great harvest.

Awaiting the next USDA Supply and Demand report I expect to hear little additional information on deteriorating crop conditions. The damage has mostly been reported. There will be something about decreased demand – slightly.

Considering historical price data gives the below chart (adapted from Blimling & Associates, Inc, 8/31/12):

Thinking a little longer term and considering the strength of the U.S. dollar and the effects of inflation gives the below chart:

Corn is currently trading about 64% lower than its all time inflation adjusted high set in the 1970s

This is all great fun, but my question remains – “What are you going to do about it?”

Dr. Jim Kendricks, retired professor, U of NE had a couple grain marketing no-brainers he tried to get his students to memorize. One that I remember is: “A short crop has a long tail.” This means that when we have a short crop grain prices peak early in the marketing year and taper off until the next harvest. Think back to the 2011 crop marketing year. Prices peaked early and tapered off - if it hadn’t been for this overdue Midwest drought. I am not betting the farm on a 2013 drought (at least not yet.)