Posted by: usset001 | April 4, 2014

Delayed Planting and Corn Yields in Minnesota

cornrawIt is early April and already there is a lot of chatter about getting the crop in the ground in a timely manner. The winter was very cold, and the frost runs very deep. And over the past 24 hours, just about the time we thought we had the snow cover gone, Minnesota received the gift of 6 plus inches of heavy, wet snow. The concern is for another year of late planting, and a detrimental effect on corn yields. We have lots of numbers on Minnesota corn planting progress and yields – let’s look at them and see if we can make any sense of the data.

Studies show that late planting puts a drag on corn yields. I found a recent article from Jeff Coulter, Minnesota Extension Corn Specialist here. In a nutshell, Minnesota corn yields are optimized with planting dates of April 25 to May 10 (these are southern Minnesota conclusions). A rapid decline in corn yields would kick in when planting was delayed beyond mid-May. This is what the studies say – how well to the conclusions hold up over time?

I reviewed USDA Crop Progress reports from 1979-2013, focusing on corn planting progress in Minnesota. Crop progress reports are issued weekly and planting progress is estimated and reported every week the information is relevant. In most years, Minnesota has planting progress to report starting in the last ten days of April and ending in the first ten days of June. There are extremes. In 2012, USDA reported 1% of the Minnesota corn crop planted for the week ending April 8. In 1983, USDA reported the last 2% of the Minnesota corn crop planted during the week ending June 19.

Late planted years: I studied the planting progress reports and picked out four years – 1979, 1986, 1991 and 1996 – that stood out as late planting years in Minnesota. Each of these years had less than 80% (a range of 71-79%, to be exact) of corn planted as of the week ending May 24-30. For perspective, most other years showed 90-100% of the corn crop planted by this time. Figures in the table are bushels/acre.

MN trend yield    Actual yield     Actual vs. trend    Actual vs. trend (%)
1979         93.5                     100.0                           6.5                       7.0%
1986        108.2                   122.0                           13.8                      12.7%
1991         118.8                   120.0                           1.2                          1.0%
1996        129.4                   125.0                           (4.4)                      -3.4%
average 112.5                 116.8                         4.3                       3.8%

Despite late planting in these four years, Minnesota corn yields averaged nearly 4% above trend yields (my estimates of trend yields are based on a simple 30 year regression).

Early planted years: More years stood out as early planting years. What do the years these 11 years – 1987, 1988, 1998, 1999, 2000, 2003, 2004, 2005, 2007, 2010 and 2012 – have in common? In each of these years, the Minnesota corn crop was at least 85% planted as of the week ending May 10-16. Other years showed an average of 55% of the corn crop planted by this time.

MN trend yield    Actual yield    Actual vs. trend    Actual vs. trend (%)
1987                    109.3                    127.0                   17.7                          16.2%
1988                    111.9                       74.0                  (37.9)                     -33.9%
1998                   137.3                      153.0                  15.7                         11.4%
1999                   139.9                      150.0                  10.1                          7.3%
2000                   142.4                      145.0                 2.6                            1.8%
2003                    150.0                     146.0                (4.0)                        -2.7%
2004                    152.6                     159.0                   6.4                          4.2%
2005                    155.1                       174.0                 18.9                         12.2%
2007                   160.2                       146.0                 (14.2)                       -8.9%
2010                    167.8                       177.0                  9.2                           5.5%
2012                    172.9                        165.0                 (7.9)                       -4.6%
average           145.4                     146.9                 1.5                         1.0%

This is interesting! Minnesota corn yields averaged 1% above trend yields in the early planting years – worse than the late planted years. Clearly, 1988 is having a big impact on the average. Remove 1988 from the equation and you will still find that actual yields in the remaining 10 years averaged 4 % over trend, or the same as the late planted years.

What’s going on? Why does the data go against numerous studies that show early planting correlating with higher corn yields? One issue may be as simple as sample size. I have, after all, just four years to look at for late planted years.

The real issue can be found in the Latin phrase, “ceteris paribus” which means “all other things being equal.” Studies that examine planting dates and corn yields hold all other factors equal. The corn varieties used, the fertility of the soils, the number of growing degree days and moisture are all the same within the year (or years) of the study. Actual results from one year to the next are not ceteris paribus – growing degree days and moisture can vary widely from one year to the next. I’ll take this a step further and note that the most likely reason the early planting years were early was because the spring was warm and dry. Warm and dry springs make for early planting. However, if warm and dry persists, it can create crop development and maturity problems later in the growing season (and 1988 was the extreme example). A similar line of reasoning holds for the late years. Why were farmers late getting the crop planted in 1979, 1986, 1991 and 1996? I suspect it had something to do with a wet spring and, as the saying goes, rain makes grain.

In an ideal world, the corn crop would be planted early and ample summer rains combined with a long growing season would lead to a bumper crop. The world is rarely ideal. Today’s case in point is western Minnesota, where they need to replenish moisture in the soil if they want a good crop in 2014. I bet they’ll take this snow storm (and another) and a later planting date if it means replenished soil moisture.

 

soybeansiconBefore the days of nearly 24-hour electronic markets, the “morning call” was very important and traders put a great deal of effort into trying to figure out if the market would open 3 or 5 or 7 cents higher. One morning I asked a fellow pit trader at the Minneapolis Grain Exchange, “What’s the call this morning, up or down?” He flatly replied, “Yes – the market will go up or down.” He was not very helpful.

I’m developing the same call for the planting intentions report on Monday. On the one hand, I see that the trade has big expectations for soybean acres, up 4-5 million acres and a new record for the U.S. On the other hand, I read some sharp people downplaying a big shift to soybean acres in the I-states. I expect a surprise on Monday and a sharp market reaction. The market will go up or down.

Posted by: usset001 | March 19, 2014

The pricing of 2014 new crop spring wheat begins today

wheatfieldAfter dragging my feet for too long, I finally posted my 2014 pre-harvest marketing plan for spring wheat in mid-November. It featured a minimum price objective of $7.50/bu. in the Sep’14 MGEX futures contract. At the time, the Sep’14 contract was trading about 25 cents shy of the minimum but, why worry? The market had spent many months trading in the $7.50-8.00 range, and I was just a short rally away from taking action.

The rally, of course, proved elusive through the end of the year and in the first month of 2014. Sep’14 futures sank to nearly $6.10/bu. by the end of January. I had lost hope of getting any sales made before harvest.

But February was a good month for wheat prices. March, so far, has been even better. Today the Sep’14 MGEX contract closed at $7.525 – the wheat market has improved an average of 20 cents per week for the last seven weeks. I get a second chance!

Today I choose to price about a third of my expected wheat crop at the closing price of $7.525/bu. I will get it posted to on my marketing plan soon. And, as always, we can hope that the first sale is the worst sale.

Posted by: usset001 | March 14, 2014

A second chance at pricing new crop HRS wheat

MGEX Sep'14 wheat futures

MGEX Sep’14 wheat futures

Last fall I was a little slow in developing and posting my 2014 pre harvest marketing plan for HRS wheat. I finished it in early November and first posted it on the CFFM website in mid-November. I consider the selection of a minimum price objective to be the single most important piece of a pre harvest marketing plan. It’s important because I will price grain only if the pricing opportunity is higher than my minimum.

For 2014, my minimum price objective for HRS wheat is $7.50/bu., MGEX September wheat futures. I lacked urgency in posting my plan because the Sep’14 contract had traded above the $7.50/bu. level for many months prior to the posting of the plan. It fell below $7.50/bu. in late October. I posted my plan and patiently waited for the rally back above $7.50. Ouch. Prices bottomed in late January at close to $6.15/bu. That’s slide of about $1.50 from mid-October prices, or 20% lower. Double ouch.

The rally back began in early February and the wheat markets has increased more than $1/bu. (all wheat markets, not just the Minneapolis market). Currently trading near $7.25/bu., we are not quite back to my minimum price objective. Nevertheless, I can’t help but view this as a second chance to price some new crop HRS wheat.

No actions yet but I’m thinking hard…

Posted by: usset001 | March 6, 2014

Old crop selling opportunities in corn and soybeans

grainbinsFrom harvest to late February, corn and soybean prices had been trading in a relatively tight range; $3.90 – $4.15/bu. in corn and $12.15 – $12.90/bu. in soybeans (cash prices in SW MN). Since then, thanks to problems with the South American crop and political problems in Ukraine, prices have broken through the high side of the range. This is good news for producers who are still holding 2013 corn and soybeans in storage. Is this the selling opportunity you’ve been waiting for, or will you wait for even higher prices in the months ahead?

In my own post harvest marketing plans, I was holding a modest amount of corn (10,000 bushels) and soybeans (7,500 bushel). I am treating the current rally as a selling opportunity, and recently priced all remaining bushels held in storage. You can see my post harvest marketing plans for corn here, and for soybeans here.

Time will tell if I was too early, but I’m tired of worrying about old crop grain. It’s time to get serious about new crop pricing opportunities.

Posted by: usset001 | February 24, 2014

Thoughts on pricing old crop corn and soybeans

IMG_4772

Two miles from the finish of the American Birkebeiner ski race from Cable to Hayward, WI, February 22, 2014.

I’ve been getting a lot of questions about what to do with old crop corn and soybeans. Market prices have been in a trading range since harvest; $3.90-$4.20/bu. for corn and $12-13/bu. for soybeans in SW Minnesota. Cash price are currently on the high end of the range and my bias is to treat the current market strength as a selling opportunity.

By the way, I skied and completed the American Birkebeiner on Saturday – 54 kilometers (33 miles) of winter bliss. The Birkie is known (and cursed) for its hilly terrain. The ups and downs of this ski event brought to mind the ups and downs of the grain  markets since harvest.

Patience is a virtue, and if you still have grain in storage, you are a patient marketer. Stubbornness is not a virtue – take a good hard look at the opportunity to get grain sold during the current price rally.

 

Posted by: usset001 | February 10, 2014

Edward Usset February/March speaking schedule

edfieldHere’s my schedule for February and March. If anything looks appealing and you want to know more (exact location, time, local contact info, etc.), email me at usset001@umn.edu.

11-Feb Tuesday St. Cloud AgStar Edge program 12:30 p.m. start

12-Feb Wednesday St. Charles, MN Winning the Game 10 a.m. start

18-Feb Tuesday Alexandria, MN Celebrity Producers Pre-Harvest 9:30 a.m. start

19-Feb Wednesday Kasson, MN Winning the Game 10 a.m. start

20-Feb Thursday Bloomer, WI Five Common Mistakes in Grain Marketing 1:00 p.m. start

22-Feb Saturday – I ski in the American Birkebeiner, Hayward, WI!

25-Feb Tuesday St. Cloud AgStar Edge program 12:30 p.m. start

28-Feb Friday San Antonio, TX Commodity Classic Five Common Mistakes in Grain Marketing

5-Mar Wednesday Rochester Celebrity Producers Pre-Harvest start TBD

7-Mar Tuesday Jackpot Junction (Morton, MN) Celebrity Producers Pre-Harvest start TBD

11-Mar Tuesday St. Cloud AgStar Edge program 12:30 p.m. start

25-Mar Tuesday Lake Crystal, MN Celebrity Producers Pre-Harvest start TBD

Posted by: usset001 | January 30, 2014

2014 pre-harvest pricing opportunities in corn

corniconI recently received an interesting question from a reader of my column in Corn & Soybean Digest.

Question: In the January issue of Corn & Soybean Digest, your column showed a 2014 marketing plan that has corn prices from $4.90 up to $6.00+. You really think they’ll get there? If so, why/how?

My reply: Your question gives me the opportunity to explain two important parts of my pre-harvest marketing plan for corn; the minimum price objective and decision dates.

The $4.90/bu. cash price ($5.40/bu. Dec’14 futures) is my minimum price objective, and it is consistent with my projection for production costs in 2014. I know that new crop pricing opportunities are not there today – in Southern Minnesota new crop corn bids are about $4/bu. I am reluctant to make new crop sales at prices that I know are below my production costs. That does not mean that I have thrown in the towel on all pricing efforts. Rallies can happen, so keep the plan close by. If prices do not get better between now and harvest, I will simply do no pre-harvest pricing. But pre-harvest pricing is just half the game and, after harvest, we will take a fresh look at post harvest opportunities and whether or not to store grain.

Concerning my minimum price objective of $4.90/bu., this not a figure etched in stone.  I encourage farmers to take a sharp pencil to their own production costs. You may be able to justify early sales based on lower production costs. And here’s a hard choice for you to consider: even if the current new crop price is below your costs, you may want to make a few sales JUST IN CASE the market is trending even lower in the months ahead. We like to think that all sales are driven by the desire to maximize profits – sometimes we need to consider ways to minimize losses. Tough call. This is the “not easy” part of marketing.

Now about that $6/bu. price objective on the high side. I always tell producers that my minimum price objective is the most important number in the marketing plan because it is your starting point for action. I also tell producers that that my higher price objectives – every price objective above the minimum – are the least important numbers in my plan. That’s due to the use of decision dates in the plan. Note that every one of my price objectives above the minimum also has a decision date, e.g. “Price 10,000 bushels at $5.70c/$6.20f, or by April 15.” The decision date is the day I am committed to pricing grain whether or not I reached the price objective – my only requirement is that on April 15, the pricing opportunity must be higher than my minimum price objective ($4.90 cash or $5.40 futures).

Decision dates makes the marketing plan a real plan for action. They place my higher price objectives into a “nice to have but not so important” category.

This year is shaping up to be a real challenge for producers. New crop prices for all of the major grains have slipped below production costs. Marketing is not easy.

Posted by: usset001 | January 10, 2014

Commodity Challenge reaches 100 games started!

CC-coverCommodity Challenge is an educational website with an on-line trading game that features real-time cash, futures and options quotes for grains. Primary users include high school classrooms and FFA groups, technical colleges and Universities and farmer marketing groups.

The site was redesigned and relaunched last April. This morning I started the 100th game on the new platform. Games have been started in 15 different states and we have nearly 2,600 players registered.

To celebrate this milestone, I started 10 new games. All of these game are open to anyone and everyone to participate in. These are the games I started.

Oklahoma HRW wheat 2014 new crop open, bids from Enid, OK – W.B. Johnston Grain

Kansas HRW wheat 2014 new crop open, bids from Salina, KS – Scoular

Montana HRS wheat 2014 new crop open, bids from Belgrade, MT – Columbia Grain

South Dakota HRS wheat 2014 new crop open, bids from Watertown, SD – Watertown Coop

Iowa corn 2014 new crop open, bids from Martelle, IA – River Valley Coop

Kentucky corn 2014 new crop open, bids from Maceo, KY – Gavilon Grain

Maryland corn 2014 new crop open, bids from Queen Anne, MD – Mountaire

Mississippi soybeans 2014 new crop open, bids from Rosedale, MS – Bunge

Indiana soybeans 2014 new crop open, bids from Brazil, IN – Gavilon Grain

Illinois soybeans 2014 new crop open, bids from Minier, IL – Minier Coop

Good luck, and let me know if you would like to start a private game for your own group.

 

Posted by: usset001 | January 6, 2014

Edward Usset speaking schedule in January and February 2014

roadtripHere’s my schedule for the next two months. If anything looks appealing and you want to know more (exact location, time, local contact info, etc.), email me at usset001@umn.edu.

7-Jan Tuesday Mankato AgStar Edge program 10 a.m. start

14-Jan Tuesday Paulding & Van Wert, OH Five Common Mistakes in Grain Marketing

17-Jan Friday St. Cloud, MN Commodity Challenge

21-Jan Tuesday Mankato, MN AgStar Edge program 10 a.m. start

22-Jan Wednesday Herman, MN Celebrity Squares Search for a Pre-harvest Marketing Advantage

23-Jan Thursday Mahnomen Celebrity Squares Search for a Pre-harvest Marketing Advantage

28-Jan Tuesday Fairmont Celebrity Squares Search for a Pre-harvest Marketing Advantage

4-Feb Tuesday Mankato AgStar Edge program 10a.m. start

5-Feb Wednesday Atlantic City, NJ New Jersey Ag Convention Celebrity Squares Search for a Pre-harvest Marketing Advantage

11-Feb Tuesday St. Cloud AgStar Edge program 10a.m. start

12-Feb Tuesday St. Charles, MN Winning the Game 10 a.m. start

19-Feb Tuesday Kasson, MN Winning the Game 10 a.m. start

25-Feb Tuesday St. Cloud AgStar Edge program 10a.m. start

28-Feb Friday San Antonio, TX Commodity Classic Five Common Mistakes in Grain Marketing

11-Mar Tuesday St. Cloud AgStar Edge program 10a.m. start

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