To Do: Price Grain Before Planting

February 26, 2018 05:08 PM

Selling a crop that’s not yet in the ground can be intimidating. But if you don’t get a head start on pricing your crops, you might miss good marketing opportunities.

“The biggest single mistake farmers make is not selling more before planting,” says Matt Roberts, founder of The Kernmantle Group, an economics research and training firm. Historically, the best windows for pricing old- and new-crop corn and soybeans is in the spring.

In January and February, farmers could have sold new-crop corn in the $4-per-bushel range and soybeans in the $10-per-bushel range. “But you only get those prices if you actually sell it,” Roberts says.

Looking at the 2017/18 marketing year, soybeans could follow a similar pattern to the last marketing year, says Todd Hubbs, University of Illinois grain markets specialist. “The possibility of a strong downward price movement through 2018 is substantial, much like last year,” he notes.

Why? Prospects for soybean crops in Argentina and Brazil seem strong, despite some weather concerns. Soybean acres and production will likely increase in the U.S.—adding to already large soybean ending stocks. At 470 million bushels, the soybean ending stocks forecast is the largest since the 2006/07 marketing year.

“With so much production uncertainty in the U.S. and South America over the next few months, the current bids for 2018 harvest delivery provide an opportunity for locking in prices on new-crop soybeans,” Hubbs says.

Watch for opportunities to sell new-crop corn and wheat, as you might also see similar price movements as last year.

“Last year, they told you to sell the carry in corn, so you had to hedge,” says Angie Setzer, vice president for Citizens Grain. “If you’re looking at $3.90 December futures, for example, you can store and expect carry to put them at $4.15 to $4.20 futures. Spreads turn into cash and give you more opportunity. To hedge or get started around these levels is not a bad idea.”

For wheat, price prospects are dismal. “The bad news about wheat is there’s a lot of it out there,” Roberts says. “In the U.S., 50% of a year’s usage of wheat will be sitting in inventories when we start harvest in 2018.”

Yet, dry conditions in the southern Plains could present some good pricing windows for wheat. “There will be substantial marketing opportunity for wheat, but they don’t have to last a long time,” Setzer says. “They could just be a day or two so it’s important to have those orders in place.”

The supply-and-demand picture for corn, soybeans and wheat all point to being proactive about marketing grain early this year. Roberts suggests marketing 25% to 33% of your expected production before April 15. Then shoot to have 75% to 100% sold by harvest. 

Sonja Begemann contributed to this story.

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Spell Check

Frank Kloucek
Scotland, SD
2/28/2018 08:48 AM

  The 2011 drought taught some corn farmers an expensive lesson. They contracted $3.80 corn with their favorite ag processor and then had to drive many miles to buy $7 and $8 corn to deliver. Sad to say the free market pricing is all but gone in the hog and chicken industry in favor of a contract growers environment. Is the same thing going to happen to the grain industry? One would certainly hope we can return to the day of parity prices and decent farm income for all of agriculture.


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