Posted by: usset001 | August 31, 2009

The 11th Commandment of Grain Marketing revisited

moneydowndrainGrain marketing is never easy – even the pros struggle with their pricing decisions. Exhibit one for your consideration: Last week I read an advisory service’s recommendation to sell the last 15% of corn and soybeans held in storage since harvest last year. Holding unpriced grain this long is clearly in violation of the 11th Commandment of Grain Marketing; “Thou shall not hold unpriced grain in storage beyond July 1.” It worked out well for soybeans – not so for corn.

Last October, Minnesota farmers were harvesting $3.50 corn. Last week the cash price was down in the $2.90 area, and we have not considered the cost of storing grain for over 10 months. The inverse in the soybean market has worked out for the Hank Holders of the world. Spot soybean prices are above the $11 mark, and much better than harvest prices in the $8.25 area (again, we should not ignore storage costs).

The story for wheat was similar to corn but worse.


Responses

  1. Here is the challenge when harvest starts; I suspect there is a great deal of unpriced corn looking for a home when harvest starts (I’m afraid that pre-harvest sales were not very fashionable with producers this year). Lots of unpriced corn leads me to believe that the harvest lows in prices will come later and stay longer.

    Basis levels are good for soybeans and OK for corn. Storage at the elevator, I assume, will be costly and involve a minimum amount (20 cents?). Soybean prices are too high for me to consider a basis contract. I think I am convincing myself to get the bushels sold at harvest. If you are worried about the loss of upside potential, get out your 2010 pre-harvest marketing plan. Any rally is an opportunity to start on next year’s crop.


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