Have You Priced Any of Next Year's Crop???
Oct 23, 2012
Producers continue to ask questions in regard to next year's crop (2013/14), and I continue to preach getting "SOME" sales and or hedges in place on a small portion of your estimated production. From my perspective pricing or building a floor on 20-30% or estimated production in both corn and beans sounds prudent. Especially with corn prices at such extremely profitable levels, sales can be made on the board in the SEP13 corn contract with prices above $6.60. We are holding our current 2013 wheat sales at 45% priced waiting for a rally back above $9.00 in the DEC13 contract to price another round. Understand that I am NOT saying prices are going to go straight lower from here, because I doubt they will, but as "risk managers" we have to take profits off the board when the opportunities present themselves. From a speculative standpoint I actually think prices could work higher on stronger demand out of Europe and some South American weather hiccups.
I am little nervous longer-term about holding huge risk in light of the higher prices encouraging more and more production. I am not sure I am in total agreement with the recent Informa acreage numbers, but you have to respect their research. They do a very thorough job, and what they are telling us is that they are expecting an additional 590,000 corn acres are going to go in the ground next year (97.5 million acres). They are also telling us an additional 2.8 million soybean acres are going to go in the ground (keep in mind last year was a record at 77.2 million acres). They are also thinking an additional 1.1 million wheat acres will be planted. The only real reduction they are anticipating is in cotton, which they believe will decline by about 2.3 million acres from last year. Moral of the story, obviously no one knows how production will end up, but I can assure you more acres are going into the ground. Higher prices have always encouraged more ground going into production. The "weather" will need to cooperate in order to see a bumper crop, but with so many acres being rolled out you could shave 15 bushels per acre off of our trend-line yields and still end up with a crop north of 13.0 billion bushels. As I have mentioned several times, getting some sales on the books for 2013 is smart risk management. In these waters stay away from those recommending the "extremes." Meaning those recommending "zero" sales or recommending an inordinate amount of your estimated production be booked. Just keep in mind global corn reserves are expected to fall to the tightest levels in almost 40 years, so don't get carried away with the early sales.
For the rest of this story and more insight into understanding your marketing tendencies, sign-up here to receive a RISK-FREE 30-Day trial of my daily Grain and Livestock commentary. So many advisors want to tell you exactly how to market your crop, I want to teach you to better understand the markets and how you should respond. If you are looking to be educated and not just told what to do, simply click here and get started!
Van Trump Report