Posted by: usset001 | June 22, 2011

Corn, Soybean and Wheat Marketing Plans, 2010, 2011 & 2012

I try to keep my marketing approach as simple as possible, but when you have three different crops and are trying to make pricing decisions over three different crop years, simple is difficult to achieve. You can find all of my marketing plans here.

On my mythical farms, I recently wrapped-up pricing of 2010 crops. Ouch.  Grain prices have been on the rise for a full year now, and that type of strong bull market can make pricing decisions made 6 or 9 months ago look, er, bad. This is the downside to a proactive approach to grain marketing – the bull market scenario leaves you with that “too early and too cheap” feeling. I have two reflections to defend 2010 pricing decisions; (1) While it hurts to leave two or three dollars on the table, every sale was a very profitable sale relative to production costs and, (2) My marketing plan prevented me from selling at the bottom one year ago. Who, you ask, would have sold at the bottom in June of 2010? Dig out an old marketing letter from a year ago – Dec’10 futures were $3.50 per bushel and the bears were predicting even lower prices.

“Too early and too cheap” will be the story on part of my 2011 crop too. Early sales that date back to last fall give me the “What was I thinking?” feeling. Nevertheless, later sales were at much better prices and I still have 25-30% of each crop left to price. The interesting decisions for 2011 will come at harvest. Will I stay conservative (as I did I at harvest last year) with strategies like selling the carry that lock in a good price but take away the upside potential? Or will I take a chance with $6 corn and $7 wheat and $13 soybeans in storage, hoping for $8 corn, $10 wheat and $15 soybeans by spring? Stay tuned (but bet on conservative).

All of this brings us, finally, to thoughts on pricing the 2012 crop. Oh no, you think, too early and too cheap again! Hold that thought – my 2012 pre-harvest marketing plans remain unpublished drafts and, therefore, inactive. But I have been thinking and talking about 2012 for 3-4 months and I am very close to taking action. Dec’12 corn futures are trading near $6.25 per bushel, Nov’12 soybeans are near the $13.40 mark and Sep’12 spring wheat futures is trading at $8.50. The corn and soybean quotes are only about 20 cents off their life-of-contract highs. Despite higher fertilizer costs, these prices represent a very good opportunity to lock-in a highly profitable margin in grain production. Forget prices and focus on margin – opportunities like this won’t necessarily stick around for a long time.

You may be too tired from early sales last year, or too wet from the steady stream of high-moisture fronts passing through. Either way, it may be time to shake off the funk and look ahead to pricing some of the 2012 crop.

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