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Floor Your Old and New Crops

June 2, 2014
By: Nate Birt, Top Producer Deputy Managing Editor google + 
CME floor trading PS b
  

The markets think corn is off to a great start in 2014, and soybean prices are looking good for the old and new crops. With those factors in mind, producers need to plan their price strategy, says Brian Basting, Advance Trading.

"It’s really important to get control of your old-crop and new-crop inventory," Basting tells the U.S. Farm Report Market Roundtable. "Get floors underneath the market. Leave the upside open. The purchase of a put option is a great strategy." 
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 The market is building in a trend yield for corn at this point, Basting says, maybe a little above trend yield. 

"The crop in general is off to an excellent start," adds Joe Vaclavik, Standard Grain. "The vast majority of it has been planted. We’re getting the rainfall that we need. There’s rain in the forecast moving forward here. It looks like during the next seven to 10 days almost the entire Corn Belt is going to get anywhere from 1 ½" to 3" of rain coverage."

It’s true that some corn acreage likely will be switched to beans in northern states where rain delayed planting, Basting notes. But there are indications that some farmers in the central Corn Belt planted more corn than anticipated in USDA’s Prospective Plantings report, meaning losses might be offset a bit.

Corn producers should also be aware that a significant level of old-crop corn needs to be priced in the next two to three months. Exactly how much old-crop corn is left won’t be clear until the end of June.

"In contrast to last year, when we were potentially empty in a lot of places, this year the market could really collapse under the weight of old-crop supplies if we are anticipating a big crop coming on, too," Basting explains.

As for soybeans, demand for the old and new crops remains strong.

"The demand projections are good," Vaclavik says. "I wouldn’t be surprised if they got better. We’ve seen demand on the front end of the bean market at $14 and $15 remain very, very strong and you’ve got new-crop prices at $12, $12.50. You’ve got to assume that demand remains pretty stout here. The new-crop bean market has held up extraordinarily well in the face of good planting conditions, a good start to the crop and also the big break in the corn market in the last three weeks."

Click the play button below to view the complete Market Roundtable discussion, including updates on the wheat and livestock markets, starting at the 7:40-minute mark:

 


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