It’s harvest time! I sense many producers are simply filling the bins, locking the doors and hoping something will change to help prices recover. While this strategy might work for a short time, farmers often paint themselves into a corner waiting on the weather. How many times have any of us been successful in doing that?
Corn 12 3 45678910
Sales Index Key
Excellent sales opportunity 10
Excellent buying opportunity 1
Lead-month futures and harvest lows should be in, or very close. Summer’s hot, dry conditions have hurt corn yields, but not as much as soybeans.
Since a modest carry exists and basis is wide, there is merit for storing, but obvious risk. As farmers hold large supplies in the bin unpriced, end users know the inventory is out there and see limited reason to aggressively forward purchase.
I’m worried producers will get too attached to their 2013 crop and store it well into the summer—a significant risk to flat price and basis after early July if crop conditions suggest much above the 158-bu. level.
Don’t expect much out of the market until May or June. Sell calls when it pays for storage. Lock in the carry incentive by selling deferred contracts and buying nearby contracts. As to flat price, sell in June and base the price on planted acres and crop conditions.
Beans 12345678 9 10
Hot, dry conditions have hit soybean yields hard. This will only intensify the near-term upside price potential of lead-month soybean futures and encourage more soybean acres in South America and the U.S. While old crop soybeans could stay strong until a large South American crop is confirmed, November 2014 soybeans will be at risk. Don’t get trapped by inaction when the lead-month futures prices are much higher than deferred contacts. This is what I expect for 2014.
Hold soybeans well into late December or early January. Adjust when to sell based on how the South American crop is developing.
Wheat 1234 5 678910
The wheat market should have some seasonal lift, but it will depend on the level of planted acres this fall and winter weather. I expect more of a choppy sideways to slight market firmness in old crop but a limited recovery in the July 2014 crop, unless some type of weather event occurs.
Livestock 123456 7 8910
Historically low cattle numbers are keeping inventory down, but higher weights are keeping beef production in line with demand. But domestic and international demand is not growing as fast as supply. Until grazing conditions in the West improve, there will be little excitement about retaining heifers.
The hog complex has the ability to increase production much faster than cattle—and the trade knows it. A flat corn market in early 2014 might encourage some modest expansion, but uncertainty about the global economy will keep expansion in check until summer. If we see $3 lead-month cash corn, it will not be long before we see $60 or lower in lead-month cash hogs. Now is the time to start preparing for a major multiple-year high.
More than 30 years of commodity insight helps Bob Utterback guide farmers through a disciplined approach to marketing.
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- October 2013