Posted by: usset001 | June 18, 2014

Paying attention to the 11th Commandment of Grain Marketing

Pipestone MN 11 th commandmentFor producers who still hold 2013 corn or soybeans in storage, you are less than two weeks from breaking the 11th Commandment of Grain Marketing; “Thou shall not hold unpriced corn or soybeans in the bin beyond July 1.”

Two forces are at work here. First is the tendency for new crop futures prices to trade lower during the summer months. Dec’14 corn and Nov’14 soybean futures are off 20 cents/bu. since the start of June. The second force is basis, and the tendency for cash prices to lose ground on futures prices during the summer months.

Like every price tendency in grain markets, the 11th Commandment is not right every year because nothing is 100%. You only have to go back to the summer of 2012 to find an example of rising grain prices during the summer months. On the other hand, it was just last year when cash corn and soybean prices fell $2 and $3/bu., respectively, from early July to harvest.

The accompanying chart of soybean prices in Southwestern Minnesota says it all. Soybeans prices, on average, decline 10% (or more!) from early July to harvest. Spot soybean prices are currently close to the $13.50/bu. mark, with Nov’14 futures pointing to a cash price of $11.00-11.50/bu. at harvest.

The risk/reward trade-off on corn or soybeans in storage does not look good right now. Pay attention to the 11th Commandment of Grain Marketing!


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