In my pre-harvest marketing plans, pricing actions are driven by two things: price objectives and decision dates. Price objectives speak for themselves, and it’s easy and fun to dream up lofty numbers for grain sales. For example, in my pre-harvest marketing plan for corn in 2012, my last (and highest) price objective calls for pricing corn with December futures at $6.15/bu. Nice thought, but the closest we’ve come this year was $5.90/bu., early in January. The challenge with price objectives is that we don’t always reach those lofty goals.
That’s where decision dates come in. Decision dates are dates when I will make a pre-harvest sale, regardless of whether I reached my price objective, as long as the price on that date is above my minimum pricing objective (and my minimum price objective is a figure consistent with my break-even cost of production).
I like to cluster decision dates in the March – June time period. While I try hard to avoid price predictions, the March – June period has more often than not proved to be good time to take action on grain pricing. My two most recent decision dates in 2012 were May 4 and May 18, so I’ve been taking some action in the past two weeks.
In the pre-harvest pricing of corn, I am currently about 60% sold at an average price of $5.82 in the Dec’12 futures contract (about $5.40 cash). The average is respectable, thanks to some very early sales made last July.
I am also about 60% sold in soybeans (see soybean plan here) and HRS wheat (see HRS plan here) at average futures prices of $12.68/bu. (Nov’12) and $8.82 (MGEX Sep’12), respectively. Like corn, I’m pleased with the early prices on spring wheat. Soybeans are frustrating – sub-$13 soybeans looks incredibly mediocre given the opportunities over the past 12 months.
To reach my objective of 75% priced before harvest, I have one more decision date approaching on June 4. Stay tuned.