Last fall I posted my 2014 post harvest marketing plans. My approach was conservative and, with spring approaching, I thought it would be a good time to share an update on my progress.
Corn: Carrying charges were large at harvest and I like selling large carries. In late October, cash corn prices were 55 cents under the nearby December corn futures contract. The carry to the Jul’15 contract was nearly 30 cents. In other words, the harvest basis for corn was 85 cents under the July contract – I sold the carry with expectations of the basis narrowing to 30 cents under by May or June of this year. Recently, the basis for corn has been quite strong, despite ample stocks in the country. Today, the basis for corn is trading at 30 cents under the May contract, or 36 cents under the July – just 6 cents from my target. I am reasonably confident of reaching my target in the next several months.
Soybeans: Carrying charges in the soybean market were also modestly large, and I chose to sell the carry (store soybeans and sell the May futures contract). At harvest, the cash price of soybeans in Southern Minnesota was 98 cents under the May contract. Like corn, I thought an expectation of 30 cents under the May was a reasonable objective. Currently, the soybean price is at 60 cents under the May contract, and the prospects for 30 cents under by the end of April are slim.
I also chose to hold some bushels unpriced and I met my price objectives in the late fall price rally, making two small sales at $9.74 and $9.82/bu.
HRS Wheat: At harvest in August, carrying charges were also large in the wheat market (Do you sense a common theme in all three markets? Large crops lead to low prices and large carrying charges.) Late last summer, wheat prices were 30 cents under the nearby September contract and 64 cents under the Jul’15 wheat contract. I sold the July contract and set ambitious sights on a 0 basis (option price the July contract) by spring. We are almost there – wheat in the Red River Valley is trading at option price the May contract, or 6 cents under the July. I am confident of reaching my original objective in the next 2-3 months.
In summary, the basis gains in corn and wheat have been quite impressive. Soybeans, on the other hand, are lagging behind. This should not be too surprising, as we are dealing with the largest soybean stocks in a decade.