Holding unpriced corn through spring is a risky strategy
Most farmers’ 2014 corn production has remained behind closed grain bin doors. Little of the 2014 crop has been priced or sold, according to the Farm Journal Pulse, a text message poll of farmers.
A Feb. 4 Farm Journal Pulse asked how much 2014 corn production farmers had sold or priced. Of the 1,200 respondents, around 20% had priced none of their 2014 corn crop, and 17% had 25% or less of their production priced. Eighteen percent of respondents had priced or sold all of their 2014 corn production.
Corn sales have picked up from early fall. On Aug. 20, 2014, the Farm Journal Pulse also asked farmers about how much 2014 corn production they had sold or priced. Of the 1,300 respondents, nearly 40% had priced none of their 2014 corn crop, and around a quarter of respondents had 25% or less of their production priced. Only 6% of respondents had priced or sold all of their 2014 corn production.
During the past several years, farmers have become accustomed to “high” prices, says Joe Vaclavik, Standard Grain market analyst. He says in 2014, corn prices were above $5.00/bu. for only a short time. “That left few good marketing opportunities relative to what we had seen in other recent years,” he says.
Luckily, the best marketing opportunities generally come during the spring, Vaclavik says. But, farmers still face plenty of risk during the next few months and should have a marketing strategy in place.
A well-developed and realistic marketing plan will help prepare you for tough and risky decisions, says Ed Usset, an ag economist at the University of Minnesota. “Farmers with unsold grain have everything riding on the upside right now,” he says. “It’s time to worry about the downside.”
To protect the downside, Usset advises farmers to always have an exit plan for their grain. “A good exit strategy should have price objectives with a time component,” Usset explains. For example, a farmer might commit to selling a certain number of bushels when cash prices reach a set dollar value.
Prices tend to rally in April, May and the first half of June. “It’s time to sit up and pay attention,” Usset says. “Look for opportunities to make sales.”
Set minimum and maximum price objectives. “Think big and be realistic,” Usset says. Once prices reach your targeted levels, be prepared to make sales. On the other hand, if prices start retreating, the time component of the plan kicks in; this makes you an active marketer, not a complacent one.
Above all, Usset says you must obey the 11th commandment of grain marketing. This rule is: Thou shall not hold unpriced corn or soybeans in the bin beyond July 1. “After June, you have two forces working against you,” he says. They include the seasonal tendency for new-crop future prices to decline and basis to weaken. “Have your grain sold by the end of June,” he recommends.
Stagnant Corn Sales
The Farm Journal Pulse, a text message poll of farmers, provides intel on how much of farmers’ 2014 corn production was price or sold on Aug. 20, 4014 and Feb. 4, 2015.
While it is hard to track all farmers’ grain sales, Joe Vaclavik, Standard Grain market analyst, says farmers seem to be undersold relative to a normal year. “Farmers are in business to make money, and current prices just aren’t paying the bills in many situations,” he says.
See an interactive map of the results.