Posted by: usset001 | March 26, 2012

Corn pricing before the March 30 Prospective Plantings Report

Here’s an interesting question from a producer in Kansas.

Question: Ed, We raise irrigated corn here in Western Kansas.  We do not have any on-farm storage and have been relying on forward cash contracts with our local CO-OP elevator as our marketing plan. Our local basis is 30 cents under the December. Should we contract now ahead of the stocks/prospective plantings reports which come out March 30? Your advice and suggestions would be very much appreciated. Thank you.

Response: You ask a difficult question. What you’re really asking is this; Is there a strong possibility that the March 30 report will be surprisingly bearish? I don’t have an answer or even a strong hunch. These reports often deliver a surprise, but the surprise has a 50-50 chance of being bullish or bearish.

Now that I’ve offered no help at all, let me make a suggestion. There are two reasons why I think every producer should have some new crop sales on the books going into the March report. First, the current level of December corn indicates a profitable price for corn production and, as many people like to say, you can’t go broke taking a profit. Second, a diversified approach calls for spreading out your risk by having some early sales on. For my own mythical farms, I am about 35-40% for 2012.

Nothing drives me crazy more than the person who thinks they can find the perfect time and price to make the BIG sale. Hey, we might get lucky now and then, nobody is that consistently good. If you have no sales on the books, get something on the books before the report. If the report is bullish, remind yourself that you can’t go broke taking a profit and that you have even more to sell. If the report is bearish, you will be relieved to know that you have some corn priced.

Good luck in 2012!

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