Power Hour: Despite Price Drops, Marketing Opportunities Remain

April 5, 2013 07:00 AM
Power Hour: Despite Price Drops, Marketing Opportunities Remain

USDA’s stocks report that showed grain levels well above trade expectations took corn prices immediately down 80 cents with soybeans taking a 55-cent hit. But marketing opportunities remain, says Chad Hart, ag economist at Iowa State University, particularly for old crop.

July/August old-crop corn bids at some Iowa elevators are in the $6.80/bu. range, still a very good and profitable price that he thinks producers should take a serious look at. At the very least, Hart says that producers should take action and place a price floor under old crop with put options. He notes that August bids at the moment are running $1.66 higher than October. An even better case can be made for selling old-crop soybeans, he says, with current bids at $13.75. "We’ve taken the hit, but that is a really good cash price."

Hart suggests being less aggressive on new crop sales, however. "The $11.60 soybean price for October/November soybean delivery is nothing to get excited about." He suggests putting in a floor with put options and wait for rallies that could occur if there are spring planting problems, or if the drought re-emerges. Likewise, Hart wouldn’t not suggest being very aggressive at present new-crop prices around $5.15, either.

Similar to his strategy for soybeans, he suggests locking in a corn price floor with put options. Illustrating the dramatic spread between old crop and new crop prices, Hart notes that a $1.70-$1.80/bu. spread exists between the two, again underscoring his view that selling old crop soon makes sense. That said, he doesn’t look for either corn or soybean prices to change much over the next 30 days.

Looking longer term, if current price levels hold, "both crop and livestock sectors look profitable as we enter 2014. That’s something we haven’t seen in a while."

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