Posted by: usset001 | June 17, 2010

Pre-Harvest Sales of Spring Wheat

I posted my 2010 pre-harvest marketing plan for hard red spring wheat over one year ago (click here for the plan). At that time, I made futures sales of the Sep’10 contract equivalent to 50% of my expected 2010 crop. I just could not resist the opportunity presented by $7.50 futures.

One year later and I have not added another sale. Over the past 12 months, the prices of wheat – all classes – have been on a long steady decline. My decision dates for the last two sales were in late May and June. It was early January when prices dipped below my minimum pricing objective of $5.60 per bushel (basis Sep’10 futures) and they haven’t been back since. Months ago I resigned myself to the idea that I would not get the opportunity to increase my pre-harvest sales of wheat.

But Canada is too wet to plant and bang, we have crisis! September wheat futures in the Minneapolis market are up nearly 50 cents in the last week and just a dime shy of my $5.60 minimum.

I like second chances and I hope I can make something of it in the next few weeks.

Here’s one more (overdue) item for your to-do list in spring wheat marketing. Take a hard look at the spread from the September to December contracts. At a 15 cent carry, I find it hard to resist (even though it looked even better at 18 cents just a few weeks ago). Any wheat producer with on-farm storage they intend to fill at harvest should take a close look at placing their hedges in the December contract or, in my case, consider rolling existing hedges in the Sep contract to the Dec contract.


Responses

  1. Have been watching the HRS market and have sold the last of the 09 crop. Now with this rally we will watch the 2011 march contract for 2010 crop, we like the carry . and we are following the 2011 futures to hopefully lock in some modest prices. also considering buying put options in sept. 09. what goes up must come down.

  2. I like the fact that you are looking ahead to pricing opportunities for 2010 and 2011. I struggle with producers who rebuy and resell last year’s crop. Be done with last year and look ahead!

    • Its seem to me as a wheat producer, we need to sell when others are holding on to their crop. I will keep watching 2011 crop prices, I am thinking of using a call option to protect myself if prices soar, will need to wait till options are reasonably priced, just before we plant our crop.

    • We have traded futures and options some time, it always surprises me when we cross the line of hedging vs. speculating, guess its the ills of being human.


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