The December 2014 corn futures contract was just shy of $5 per bushel Sept. 27, but prices could be close to $1 per bushel lower than that with the 2014 harvest.
Even if you haven’t sold your 2013 crop, should you sell 2014 at the same time?
Analysts say it’s not too early to start. "Consider marketing 10% of expected production for 2014, especially if prices pop over $5," says Jim Hilker, an ag economist at Michigan State University.
Corinne Alexander, a Purdue University ag economist, agrees. "Prices next fall could be substantially lower than current December 2014 futures," she says. "Next harvest, the December 2014 corn contract could be closer to $4." Hilker and Alexander don’t advise booking a large portion of your 2014 crop, as there are too many unknowns.
Not all agree. "I like to market parallel to locking in inputs," says Chad Hart, Iowa State University ag economist. Without knowing what inputs are, it’s impossible to lock in a profit margin because you don’t know your costs. Once farmers know their inputs, Hart agrees that $5 for 2014 doesn’t look bad, given what prices could be.
One reason to consider pricing the 2014 crop is that if crop insurance is based on $4.90 per bushel futures, 80% coverage means that the crop insurance price guarantee falls to less than $4, says Lawrence Kane, a Stewart-Peterson branch manager in Yates City, Ill.
This would result in more income risk for the 2014 crop than this year’s $5.68 guarantee, he says. This leads Kane to believe that it’s not too early to consider put options for the December 2014 contract for a portion of production.