Implications on corn after the August Supply/Demand Report.
Aug 14, 2014
In many ways, the USDA did many producers a favor by implying yields on the low side of expectations. Historically big crops grow so we have to assume yield will probably end up at the 170 to 171 level if no weather event is seen. So using the figures the USDA have provided us, if the corn yield is at 164.4 bushels per acre and input costs at $690.59 per acre, breakeven would be at $4.20 a bushel. In order to make 5% return on investment for this year’s corn production, one would have to have sold their production already at $4.41. The bear is here and for the time being not unless a weather event is seen in the near future, there is no reason for these markets to go higher.
Where does this leave the producer? Those who have to sell off the combine will be scrambling to find alternatives to enhance revenue. Many will say to themselves, I can handle one year of not making money but what if we are in a sideways to long-term bear market. What do you do?
Now, before harvest, is when one should be discussing marketing strategies and how to manage risk for the next several years. The bull was fun and producers loved the prices received for their production but now one has to survive the bear!
If anyone feels they need to put structure into their risk management decision-making and would like to discuss marketing strategies, call Bob or Laura (765)376-4476) or (1-800-832-1488). We will also try to answer questions in upcoming blogs and we welcome emails to email@example.com or firstname.lastname@example.org.
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