Marketing plans may need some revisions after last week

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Now that the dust has settled from last week’s ugliness in the corn and soybean pits, many farmers are grasping for any opportunity to rebuild their marketing plan.  When both the futures and cash markets were collapsing simultaneously, Twitter.com ironically carried two comments that were priceless in their juxtaposition:  “I think my new marketing plan is called storage” and “He that withholds corn, the people shall curse him: but blessing shall be on the head of him that sells it. Proverbs 11:26.”  They appeared within moments of each other, but there was no indication that one was a “follower” of the other.  Nevertheless, what dynamics are driving the grain markets now?

What’s past is over and done and we cannot reclaim the $1 we lost in corn and $2.40 we lost in soybeans.  Forging ahead, we look for insight from Dan O’Brien, who has issued a series of market outlooks on behalf of Kansas State University, and by Dan Hilker of Michigan State University, who has calculated price prospects for corn, soybeans, and wheat.

Corn price prospects are clouded by uncertain acreage according to O’Brien, “If a large 14 bil. bu. 2013 US corn crop occurs then periods of extreme weakness in US corn prices would be likely to occur at fall harvest, with available supplies rationed by opportunities for returns to storage through the winter and following spring.  It seems likely that some combination of lower than currently projected US corn acreage and/or lower than currently projected corn yields will cause US corn production to be in the 13.0-13.5 bil. bu. range, with moderately higher corn prices than the USDA is currently projecting for the “new crop” marketing year 2013/14. The risk of a weather induced extremely short US crop also exists through the remainder of July and August. “

For your corn marketing plan Hilker offers the following price probabilities:
1) Dec corn most likely price at maturity: $4.69, 50% chance between $4.33 and $5.31.
2) Mar corn most likely price at maturity: $4.71, 50% chance between $4.28 and $5.57.
3) Jul corn most likely price at maturity: $4.73, 50% chance between $4.26 and $5.82.

Soybean price prospects are mixed says O’Brien. “It is likely that US soybean prices will be sharply lower in fall 2013 if US produces a large 2013 soybean crop that will be forced to compete with record high 2013 “old crop” South American soybean supplies already being exported.  If Chinese soybean import demand moderates by an appreciable degree, then US and world soybean market prices will likely be sharply lower than current “old crop” cash market levels.”

For your soybean marketing plan Hilker offers these price probabilities:
1) Sep beans most likely $13.16 at maturity, 50% chance between $12.64 and $13.81.
2) Nov beans most likely $12.38 at maturity, 50% chance between $11.64 and $13.47.
3) Jul beans most likely $12.21 at maturity, 50% chance between $11.26 and $13.84.

Wheat price prospects “are likely to remain at least moderately strong from now through late summer 2013, says O’Brien.  If a large US corn crop occurs in 2013, US corn prices would likely decline sharply in the fall 2013, having a spillover effect on US wheat prices in the absence of other international wheat supply-demand factors that would provide independent wheat market support.  However, if a lower than forecast 2013 US corn crop is produced to the degree that US corn prices remain historically high, then cross market feed-price arbitrage will likely continue to support US wheat prices, maintaining wheat and feed grain prices near parity levels.  Unforeseen volatility in financial markets may also impact wheat and other commodity prices in marketing year 2013/14.”

For your wheat marketing plan  Hilker offers these price probabilities:
1) Sep wheat most likely $6.49 at maturity, 50% chance between $6.22 and $6.83.
2) Dec wheat most likely $6.47 at maturity, 50% chance between $6.01 and $7.23.
3) Mar wheat most likely $6.43 at maturity, 50% chance between $5.88 and $7.51.

Summary:

Lower price prospects for corn, soybeans, and wheat are currently dominating the grain markets, making many farmers wonder if higher prices have left for the foreseeable future, or if this is a brief correction in the market.  Regardless of which it may be, marketing plans have to be created and implemented.

Source: FarmGate blog


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