I continue to drag my feet on pricing 2013 grain, but I also continue to think about it. Attached is a draft of my 2013 pre-harvest marketing plan for corn. I emphasize “draft” because I feel compelled to act when it is finalized.
In my approach to pre-harvest marketing, production costs loom large as they define a starting point and a minimum price threshold. In earlier posts, I suggested that production costs in 2013 would not differ much from 2012 (and my 2013 pre-harvest marketing plan might not look much different from 2012). Bob Craven, my colleague at the Center for Farm Financial Management and an expert on Minnesota grain production costs, recently examined the FINBIN database and his crystal ball to project corn production costs in 2013 for southern Minnesota.
His findings? In general, productions costs in 2013 will look similar to 2012 except for two items; land rent and direct government payments. Rents are projected to rise $25-30 per acre. Direct government payments of $20 per acre – a payment we treat as “buying down” production costs – are up in the air for 2013. We think it is best to assume the worst, and take them out of the equation.
The net result is shown in the attached draft. My minimum price objective is slated to rise to $5.00/bu cash price, or $5.50/bu Dec’13 futures price (I assume a basis of 50 cents under at harvest in 2013, 10 cents wider than 2012). These minimums are 40-50 cents higher than 2012. I also chose to stretch out my price objectives. Last year, my price objectives were in 25 cent increments – this year I moved to 40 cents increments. Decision dates remain scattered in the March – June period.
Does this look reasonable to you?