Commodity Marketing Update
Posted: November 5, 2013
In no way do I intend to suggest what any one individual farmer should do. Instead, I am sharing my thoughts and observations as I see the corn and soybean markets today.
For me – this is the least exciting season to be marketing fall crops. In most years the risk is gone for our buyers. Acres are known and the harvest is nearly complete - 86% of the nation’s soybeans and 73% of the corn in the bin as of Sunday, November 3rd. This is in line with the five year average. One big wild card impacting prices for our 2013 crops (and beyond) is demand. Demand is every bit as impossible to predict as long term weather. We can look out and see more mouths to feed, continuing prosperity (in some countries) and ready global economic exchange. Things can change, but for now I am expecting a typical market response when harvest is “adequate” to play out for corn and wheat. The bean market appears to be not-quite as satisfied with the U.S. harvest, and prices there may depend on our South American competitors’ 2014 harvest and thus suggest some price support for now.
From what I have heard around PA, our harvest is at least average, maybe well above average depending on the location. Have you called the local elevators lately asking to book a delivery? Basis is way bad! Remember what basis tells us? Basis is a signal on local supply and demand. If basis is less than normal our buyers are telling us they do not want the grain at this time. Looking at cash bids we see the prices for January and beyond get a little better. Our buyers are telling us they will pay for us to store the crop and deliver it once they have had the chance to work off the harvest glut. This is one of those years we will get paid for farm storage. In PA, this is often the case for corn. Pricing un-committed bushels for future delivery and storing – is an appropriate decision at this time.
Looking at soybean prices we see a different story. The near-by price (delivery now) is better than the far off months. This again is a strong signal from the market. However, this time we should be hearing that soybeans are not quite filling the demand right now. Buyers are willing to pay more now in order to get us to deliver. There is no opportunity to lock in a storage return for beans at this time. Of course, we may wonder about selling all beans now and what will happen later in the marketing season if all the beans have been committed? This borders on predicting the future, but is a valid question. Think about last year’s bean prices. Harvest was the peak. Prices throughout the marketing season were good, but did not cover the cost of storage over the harvest price. I am asking producers to consider marketing as much of their soybeans at harvest as possible and storing un-priced a minimum amount gambling on a price increase later.
Actually, I have nearly quit thinking about the 2013 crops and started in earnest to consider 2014 prices. DEC 2014 corn has already traded from 4.65 to 6.16 and is at the low of 4.65 today (CME prices). NOV 2014 soybeans have traded from 11.00 to 13.33 and are at 11.52 today (CME prices). The most interesting time to market crops is typically the year (or two) before they are harvested. The risk is huge for buyers, and producers. When risk is on price bids are more aggressive.
If you are able to participate in an Extension grain marketing discussion group over the winter – we will explore this and other concepts in more detail.