Sell! Sell! Sell!09/07/2017 | Economics
By Matthew Wilde, ISA senior writer
Farmers should sell un-marketed old-crop grain, farm management and marketing experts say.
Nearby cash grain prices and basis levels probably won’t improve much, if anything, as another monster harvest looms and large stockpiles of grain remain. Analysts contend incurring additional storage costs is likely a losing proposition.
The government projects a record soybean crop nationwide at 4.38 billion bushels and the third highest corn crop on record at 14.2 billion bushels. Ending stocks for soybeans and corn in 2016/17 are estimated at 370 million bushels and 2.37 billion bushels, respectively.
Steve Johnson, ISU farm management specialist based in Polk County, said it’s time to price or find a home for 2016 bushels.
“A negative return to storage is likely for 2016 bushels that have yet to be marketed,” Johnson said.
Monthly cash grain prices during the marketing year (September-August) typically peak in June, research shows.
Johnson said “very few” cash sale strategies remain for old-crop bushels without adding additional storage costs or future price risk. Storage and interest costs could approach 50 cents per bushel during the past 10 months for unpriced grain. This cost needs to be subtracted to determine the final cash price received.
ISU recently released a new online grain bid comparison tool to help squeeze as much value as possible from soybeans and corn.
“This decision tool allows for comparing a variety of ‘what if’ scenarios for selling grain at various cash prices while considering your own transportation costs,” Johnson said.
Click here to check out the marketing tool.
Users collect up to five cash grain bids from various locations and input prices in the Excel spreadsheet along with their own estimates of operating costs and distance to haul the grain. For new-crop corn bushels, adjustments should be made for higher moisture content to adjust for drying and shrink discounts.
Some processors have narrowed old crop basis to assure a flow of bushels before combines roll. The grain bid comparison tool is an excellent way maximize revenue potential, Johnson said.
“Once harvest gets underway, expect that basis to widen for much of October barring weather delays,” he added. “Think about checking various processor cash bids in your region, especially if you have a semi available to deliver bushels.”
Regional basis opportunities may occur due to a possibility of variable 2017 yields and a delayed harvest, Johnson added.
Soybean and corn yields statewide, as of Aug. 1, are projected at 56 bushels per acre and 188 bushels per acres, respectively. Extremely dry areas, especially in south central Iowa, won’t fare as well.
Cash bids from various buyers statewide on Wednesday for delivery through Sept. 15 included:
- Gavilon in Dubuque, soybeans, $9.41 per bushel; basis, negative 30 cents
- Cargill in Iowa Falls, soybeans, $9.56 per bushels; basis, negative 15 cents
- East Central Iowa Cooperative in La Porte City, soybeans, $9.21 per bushel; negative 50 cents basis
- Flint Hills Resources ethanol plant in Shell Rock, corn, $3.21 per bushel; negative 40 cents basis
- ADM in Cedar Rapids, corn, $3.38 per bushel; negative 23 cents basis
- East Central Iowa Cooperative in La Porte City, $3.12 per bushel; negative 49 cents basis
For farmers who didn’t take full advantage of summer weather rallies, Johnson said it will be difficult to break even on remaining un-priced bushels.
Sterling Liddell, a senior vice president with Rabo AgriFinance specializing in grain and oilseed analytics, agreed. He said buyers, for the most part, are not clamoring for grain knowing there’s ample stocks and a big crop only weeks from harvest.
“The market is at least offering cost of interest for a few months,” he continued. “Otherwise, it’s starting to make less sense to hold on to grain much longer.”
Storing grain typically pays off. It provides marketing flexibility, along with other perks.
A Farm Futures analysis from 2012-14 concluded storing soybeans during that time provided a $1.50-per-bushel financial gain. Corn garnered a 40-cent-per-bushel return.
Maximizing storage income relies on selective rather than continuous use of storage facilities. Nearly one-third of Iowa crops are marketed during harvest. About 6 percent are sold in September.
“As farmers clean out bins to prepare for harvest, market lows are usually set in August and early September,” Liddell said. “Calculating costs is key to use the market to pay for storage.”
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