Holding unpriced corn through spring is a risky strategy
Most farmers’ 2014 corn production remains behind closed grain bin doors, according to a Farm Journal Pulse, a text message poll of farmers.
A Feb. 4 Farm Journal Pulse asked farmers how much 2014 corn production they had sold or priced. Of the 1,200 respondents, around 20% had not priced their 2014 corn crop, and 17% had priced 25% or less of their
production. Eighteen percent of respondents had priced or sold all of their 2014 corn production.
While corn sales are still spotty, they have picked up from early fall. On Aug. 20, 2014, the Farm Journal Pulse asked farmers how much 2014 corn production they had sold or priced. Of the 1,300 respondents, nearly 40% had not priced their 2014 corn crop and around a quarter 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. In 2014, corn prices were above $5 per bushel for only a short time. “That left few good marketing opportunities relative to recent years,” he adds.
The best selling opportunities generally come in April, May and the first half of June, Vaclavik says. However, farmers still face plenty of risk during the next few months and should have a marketing strategy in place.
A well-developed marketing plan will help prepare farmers for tough and risky decisions, says Ed Usset, University of Minnesota ag economist. “Farmers with unsold grain have everything riding on the upside right now,” he says. “It’s time to worry about the downside.”
Usset advises farmers to have an exit plan. “A good exit strategy should have price objectives with a time component,” he says.
For example, a farmer might commit to selling a certain number of bushels when cash prices reach set minimum and maximum price level objectives. “Think big and be realistic,” he adds.
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.
Above all, Usset says farmers need to obey the 11th commandment of grain marketing: 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.
The Farm Journal Pulse provides intel on how much of farmers’ 2014 corn production was priced or sold on Aug. 20, 2014, and Feb. 4, 2015. Farmers seem to be undersold relative to a normal year, says Joe Vaclavik, Standard Grain market analyst.
To see a full listing of past Farm Journal Pulse polls and to sign up to participate in the survey, visit www.FarmJournalPulse.com