If you haven’t priced any of this year’s expected corn production, you’re not alone.
A recent AgWeb.com poll asked: How much of your expected 2022 corn crop do you have priced?
The results, from 1,325 responses, are:
“I suspect many farmers still have 0% sold,” says Jon Scheve, president of grain for Superior Feed Ingredients. “Usually, 10% of farmers each year protect or hedge their grain early. I would expect some used puts as protection, and now with the recent price drop feel fully protected.”
Bill Biedermann, hedging strategist with AgMarket.Net, agrees the results show an average pace for farmer selling.
“Farmers being about 20% sold is not too far from normal,” he says. “We typically expect 30% forward pricing in the summer. This year, approximately 40% of the crops have had less-than-ideal weather and this would certainly pull back farmer willingness to sell.”
Adverse weather conditions are definitely playing a role, Scheve agrees.
“Farmers in the now drier areas who started with what they thought was 25% priced are now likely concerned they are near 50% sold since their yields may be reduced with the recent heat and limited precipitation. So they are holding off selling more for now,” he says.
Should You Sell More?
After hitting $7.66 per bushel, December 2022 corn prices have slid lower this summer.
In a normal year, this is the seasonal pattern corn prices follow. But is this a normal year?
“Over the last two years, highs for the marketing year occurred after harvest, which did not happen between the 2013 and 2019 crop years,” Scheve says. “Usually pricing a high percentage of your corn production before harvest is a good rule of thumb, but when outlier events happen, sometimes you have to be prepared to break the rules.”
The war in Ukraine has created a lot of unknowns that may not be understood by the market until after harvest, Scheve says.
“The rest of the world may need to make up for the 800 million corn bushels trapped in Ukraine, especially if world demand remains normal,” he says. “This could lead to price rationing of the worldwide corn crop this winter, which could mean higher values after harvest.”
While it may be difficult to lock in corn sales now, take the time to weigh your options, Biedermann suggests.
“Our company advice is to be 60% sold and of course we have some calls bought to cover the upside in case yields fall and prices respond,” he says. “But in reality, I believe that even our own clientele is short of our recommendations by either using a conservative benchmark yield to sell against or simply wanting to see pollination finish before they commit.”
Put current prices into perspective.
“Prices are still very good and a respectable profit per acre can be locked in,” Biedermann adds. “We are very adamant about getting to 60%. And if pollination goes well, then even more.”
Keep An Eye on 2023
Biedermann encourages farmers to not forget about 2023 grain sales.
“We have also locked in a floor and committed to a max price on 50% of the 2023 crop,” he says. “This actually is not designed to protect a price on the crop we will grow, but it mathematically secures a price on the insurance we will buy. With prices at $6 per bushel for corn, it seemed like a no brainer to lock in operating profitability and transferring that over to the insurance in February 2023.”
Long-term thinking is key for grain marketing success.
“I always recommend farmers build more storage and develop a marketing strategy that maximizes profit potential by understanding and capturing market carry while also working the basis market after harvest is complete,” Scheve adds. “This strategy works regardless — if the highs occur before or after harvest.”
Check the latest market prices in AgWeb’s Commodity Markets Center.
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