During the past few years, grain prices have been extremely profitable. But, what goes up, can easily come down.
It’s likely we’re cycling into a multiyear downturn in the grain markets, predicts Ted Seifried with the Zaner Ag Hedge Group.
While it looks like prices are destined to drop, he says the remainder of this year looks somewhat promising. "Coming off last year’s drought, we have a lot of empty storage," Seifried says. "So, it’s likely we’ll see a lot of corn go into storage. $4 should be a strong floor for corn this year, but next year is a concern."
Even though corn might drop to $4, there will still be opportunities if you’re ready and flexible. "The key is to have a game plan going into something like this," he says. "We’ve had three years of really good prices. There have been good selling opportunities, but at the same time, we’ve destroyed some demand."
Going forward, Seifried says the market may be looking to trim production and buy back some of that demand. "It is more difficult to buy demand back than it is to ration demand," he says.
Seifried says farmers need to identify areas of their operation that could become more efficient and really understand their breakeven levels. "$3.50 corn is priced below most producers’ breakeven," he says. "So, farmers need to prepare for the worst and hope for the best."
For More Information
Read Seifried's blog: The Ted Spread
See current market quotes in AgWeb's Market Center
- Mid-November 2013