So how do you know prices will remain above the spring guarantee? You don’t, but Johnson says look at the history of where they have been relative to the spring and fall prices for the past dozen years.
- Only in 5 of those 12 years is the Harvest price higher than the Projected Price, but it is in each of the last 3 years. Note that for all 12 years the December corn futures price high was above the Projected Price. Only the years of 2006 and 2010 did this high not exceed the Harvest Price.
- This period of time is referred to as the Spring/Summer High Price or the Seasonal Highs. Note that for all 12 years the December corn futures price high was above the Projected Price. Only the years of 2006 and 2010 did this high not exceed the Harvest Price.
Johnson says if the 2012 highs were not hit with your marketing plan, this is a new year and a new opportunity to take action. “For corn and soybeans in 2013, many missed the opportunity to sell new crop bushels last August or September at high prices. A new goal might now be to sell a portion of your guaranteed insurance bushels in the spring and summer months. Cash sales can be made using forward cash or hedge-to-arrive (HTA) contracts. Both contracts require the delivery of a specific quality and quantity of bushels. The forward cash contract fixes both the futures price and the basis when the contract is initiated, thus the cash price for delivered bushels is known.”
The corn market has moved into positive territory with regard to the crop insurance guarantee. This allows a policy holder to not only be guaranteed the minimum revenue of $5.65, but also sell corn for more than that level. This should be part of your marketing plan. In recent years, the high for December futures has been above the projected price.
Source: FarmGate blog