Power Hour: Position Yourself for More Market Surprises

September 14, 2012 09:31 AM
Power Hour: Position Yourself for More Market Surprises

More market surprises could be heading your way between now and early October, which impacts how aggressive you want to be with both corn and soybean sales.


On both crops, "the market is telling us that it doesn’t want us to store," says Jim Hilker, ag economist at Michigan State University.

Even so, the corn market is trading on the lower end of the $7.50 to $8.50 range for December 2012 futures that it’s been in since July. If prices for any number of reasons move back to the top end of the range, "I’d sell some," Hilker says. That said, "I’m not in a hurry to do tons of pricing, unless they move up sharply."

Hilker doesn’t look for an immediate price crash of either corn or soybeans, given how short carryover is. However, he thinks that for producers who have done little or no marketing of old crop, current prices are so attractive that between now and early October is the time to at least start locking in a percentage of the 2012 crop.

Power HourShould prices move sharply higher after one or more of three upcoming USDA reports, Hilker advises a more aggressive marketing stance. One is the September 28 Grain Stocks report. "That will give us the (stocks) number and there is room for a pretty big surprise," Hilker says.

Another key release that day is USDA’s Hogs and Pigs Report that will provide an indication of how pork producers are responding to high grain prices. If that report does not show much of a cutback in hog feeding—which is not apparent yet, in Hilker’s view—the impact on grain markets could be bullish.

The final report to watch for is USDA’s Oct. 12 Crop Production. The October one is typically when the department makes its adjustment on harvested acres, thus the potential is there that corn production estimates, in particular, could be ratcheted down. If so, the report could be more bullish than this Wednesday’s report was.

Hilker thinks it makes sense to sell a small portion of your anticipated 2013 corn, with December 2013 futures right now at $6.60, near their high. With a good crop, the potential exists for fall 2013 corn prices to be $5.25 cash, he says, far lower than today. An excellent crop with a yield of 165-170 bushels per acre could mean that prices actually fall below $5, Hilker says. "We’ve had 165 before." Because of that, he suggests locking in at least 10% of expected production relatively soon.

However, "even the hint of a drought next spring will send markets crazy," Hilker adds, regardless of whether the South American crop is a large one. His strategy for selling soybeans is very similar to corn. 


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