In the Corn Belt, August brought a great deal of variability to ear development, even from stalks next to each other.
Crop tour confirms producer insights, slows advance sales
After seeing late developing crops with good yield potential in multiple states on Pro Farmer’s Midwest Crop Tour in August, those farmers who rode along and took the pulse of crop conditions are shifting marketing gears.
"I don’t feel the need to make sales after seeing the corn crop," says crop scout Tim Gregerson. Still, the Herman, Neb., corn and soybean producer was open to making a small percentage of sales within weeks of results, but only if the market factored in stress from late summer heat wave indexes hitting triple-digits.
"The corn market has more work to do," Gregerson says. "The 2013 weekly crop condition ratings have not been accurate. USDA has overestimated the good to excellent crop ratings."
Seeing the Midwest crops up close in combination with the long-range weather outlook has Gregerson delaying most of his corn sales until winter, when he expects prices and basis to be more attractive. "I won’t feel the need to market anything during harvest," he says.
Gregerson, who uses options, cash sales and futures, is far less forward sold than he typically is—a story echoed by nearly all farmers throughout the seven-state swing from South Dakota to Ohio.
Some farmers began shifting their marketing strategy for 2013 early on. "We are taking a different marketing approach this year," says Richard Guse, who farms 3,900 acres of corn and soybeans near Waseca, Minn.
"We have no cash corn sold for the new crop," Guse says. "However, back in January, I bought a bunch of puts, so I’m 100% covered at about the $6 level." Guse found less corn than he expected as he went through the Eastern Corn Belt, which could mean rock-bottom prices won’t be reached.
"We expected to see fantastic things in Illinois, Indiana and Ohio," he says. "It’s not bad, but it’s not what I was expecting."
Realistic, but Optimistic. Still, Guse is plugging far lower prices into his crop models. He thinks prices in 2014/15 could hit $4, if not dip below. For that bearish scenario to ring true, it will take two good back-to-back crops.
"A lot of people are predicting $3.25 to $3.40 corn, but I think the thing they are missing is that Brazil is going to cut back quite a bit this winter," Guse explains. "The numbers don’t work there. If corn stays sub-$5, I think the world’s production will fall off. They can’t do it for that price, so I don’t think it’s going to get as ugly as a lot of people think."
Illinois farmer Mark Henrichs thinks it’s possible corn could fall to $4 per bushel for the next two years, but because of dry conditions he and other producers are experiencing, he says it’s more likely that corn will rebound closer to the $6 level.
The corn market has more work to do. The 2013 weekly crop condition ratings have not been accurate. —Tim Gregerson, Herman, Neb.
However prices shake out, it won’t change his marketing strategy. "I never forward sell," says Henrichs, who owns a majority of his 5,200 acres of corn and soybeans near Saunemin, Ill.
Instead, he sells his crop nine months after harvest with the hope of more accurate USDA numbers. If Henrichs were to forward sell and be unable to deliver, he would forfeit a bunch of his multi-peril crop insurance check, he explains. "By January or February, USDA will make some truthful adjustments," he says.
Henrichs acknowledges that many farmers take a different approach, but says the strategy has worked well for the 35 years he has used it, including during the 2012 drought.
- October 2013