Posted by: usset001 | July 7, 2010

A second chance at pre-harvest sales of spring wheat

I like second chances.

I wrote my 2010 marketing plan for spring wheat in June of 2009. At that time,  I settled on $5.60 September wheat futures as my minimum price objective. Little did I know that by mid-January of 2010, $5.60 would become a ceiling for futures prices in the new year. I’ve been waiting months for the opportunity to price the final 7,500 bushels in my pre-harvest market plan. Patience paid off as Minneapolis new crop futures closed today at $5.61½. I’m throwing in a little twist – instead of selling September futures, I’m selling December futures at nearly a 16 cent premium.

Changes to my plan will be posted next week. I am now 75% sold on my 2010 crop at an average Sep’10 futures price of $6.84 (assuming September futures at a 16 cent discount to December) or a cash wheat price of about $6.50 per bushel.


Responses

  1. Do you factor protein discounts into your price objectives? With protein discounts at .12-.20 per 1/5 of protein below 14% and the prospect of low protein again in the Red River Valley, spring wheat producers can likely expect a .50-1.00 protein discount. Higher yields might make up for it this year but I’m just curious on how you think about the protein discounts…..

  2. Protein discounts (and premiums) are the reason why I tell my corn and soybean producing friends how easy they have it in the world of marketing. I know of no effective way to manage protein discounts, though you have a modest amount of control through your choice of variety and fertilizer applications. There is one other potential offset to the problem of low protein – I associate low protein with ample moisture and BIG production. Your price per bushel after discounts may be much less, but you might overcome some of the challenge with big yields.

    Let’s face it – marketing wheat is a much bigger challenge than your average grain.

  3. July 8, 2010
    This Thurday I futures fixed for the 2010 crop, March 2011 MW at $5.96. Next I futures fixed for the 2011 crop Dec 11 MW at $6.48. I went to the march contract because there appears to be plenty of 09 crop on hand yet to sell, I feel we can expect plenty of price pressure during and after harvest, as I went out to the March I think there will be less price pressure, hopefully the basis will be narrow.

  4. Just made more sales into 2010 crop and the 2011, 2010 March at $6.10 and 2011 Dec $6.52.
    Just hoping these are the low prices for the marketing season. Your marketing classes did help. Topic on protein discounts, it one of those things we can’t control and hope we get the extra bushels to make up the difference.


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