Wait and Hope: Not All Crops Are Equal
Producers holding and hoping for better prices could prove correct if yields don't match USDA's record expectations. Not only are we hearing reports of partially filled ears, but some old-crop corn coming out of bins is also severely damaged and out of condition.
If you do store, be sure you know what you are putting in the bin: Some early-harvested grain is being severely docked for cob rot.
Storage returns could be less for soybeans. Prices are being buoyed by strong export sales for delivery in the first half of the year, leading to relatively tight near-term supplies—especially with harvest delays in the South due to wet weather. Meanwhile, if South America's crop looks good, prices will ease later 2010. The result: an inverted market and losses on storage.
Although adviser cash sales are not high, our chart doesn't show hedges and put options, so they may be protected. —Linda H. Smith
Key Market Factors
> Field reports of unfilled cobs and diseased grain in some areas.
> Even big hog producers cull herds.
> Recession is over, says Fed Chairman Ben Bernanke.
Margin Calls vs. Fees
The fees some elevators are charging make cash contracts an expensive convenience, says Farm Journal Staff Economist Bob Utterback. "I've heard of producers paying 15¢/bu. to sign a December 2010 hedged-to-arrive contract. That's like a $2 margin call at 6¼% for a whole year. Remember, a margin call is a cash-flow need, but it only costs you the interest." —Linda H. Smith
Percent Sold and Market Value on Sept. 1, 2009
Click here for the Adviser Track Records Table
Top Producer, Ocobter 2009