2013/14 Crop Marketing

Transcription

1 2013 MN Crop Insurance Conference September 12, /14 Crop Marketing Edward Usset, Grain Marketing Specialist University of Minnesota Center for Farm Financial Management Center for Farm Financial Management: Book: Columnist, Corn & Soybean Digest: Blog: Post Harvest Marketing Plans your check-off dollars at work 1

2 Agenda Corn - the basis is upside-down Soybeans all over again? The soybean/corn spread (looking ahead to 2014) Is this another Golden Age of Agriculture? To store or not to store? Earl asks one important question: What is the carry in the market? 2

3 Carrying charges have returned to the corn market! CBOT Corn Futures: September 5, 2013 May $4.83 Jul. $4.89 Mar. $4.74 Dec. $4.61 Earl sells the carry! The normal situation nearly a 50 cent gain from selling the carry! Jul. $4.89 Mar. $4.74 May $ under by June $4.64 Dec. $ cents under $4.16 cash 3

4 Corn the basis is upside down I am NOT a basis bull! harvest basis: -25Z spring basis: -40N Earl sells the carry! An upside-down basis hurts May $4.83 Jul. $4.89 Mar. $ under by June? $4.49 Dec. $ cents under $4.36 cash 4

5 Post Harvest Corn Plan preliminary Carrying charges are back in the corn market Earl has a carry to sell! Basis is good for harvest, not so good for 2014 delivery Futures prices off sharply from year ago Post Harvest Corn Plan preliminary 45,000 bushels: Sell the carry with July futures. Exit plan: Unwind the hedge when the basis reaches 10 cents under the July contract, or by June 15, ,000 bushels: Place unpriced corn in storage. Exit plan: $4.80, $5.20 and $5.60. Bushels unpriced on May 1 will be sold in May and June. Risk no more than $1 below the harvest price. 5

6 Soybeans 2003 all over again? Nov 13 futures are up $2/bu. in the last month (17%)! 6

7 400 U.S. Soybean Crop Conditions, Selected Years Crop Condition Index The crop condition index is based on weekly USDA crop ratings. An index of 500 reflects a crop in excellent condition, 400 is good, 300 is fair, 200 is poor and 100 is very poor. U.S. soybean conditions are sinking. 320 Good Years June week week week early week week week week early week week wk# July August week 13 week 14 week 15 week 16 week 17 week 18 Soybeans CBOT Soybean Futures: September 5, 2013 Nov. $13.68 Mar. $13.44 May $13.16 Jul. $13.09 Earl sees an inverse in soybeans Sep. $

8 Post Harvest Soybean Plan preliminary Carrying charges are inverted Earl holds unpriced grain Futures prices are lower than year ago Basis is weak average and expected to get better by spring Post Harvest Soybean Plan preliminary 20,000 bushels: Sell at harvest. 5,000 bushels: Place unpriced soybeans in storage. Exit plan: $13.50, $14.00 and $ Bushels unpriced on May 1 will be sold in May and June. Risk no more than $1 below the harvest price. 8

9 The Soybean / Corn Spread Soybean prices are up $2/bu., relative to corn 330% 310% Soybean/Corn Price Ratio, based on national average prices from October thru February values based on October bids in southern Minnesota. 290% Soybean/Corn Price Ratio 270% 250% 230% 210% 190% 170% 150% 9

10 The Soybean / Wheat Spread Soybean prices are up $2.30/bu., relative to spring wheat 220% Soybean/Wheat Price Ratio, % based on national average prices from October thru February values based on September bids in the Red River Valley. Soybean/Wheat Price Ratio 180% 160% 140% 120% 100% 10

11 Corn 2014 Pre Harvest Marketing Plan Objective: Buy crop insurance to protect my production risk and have 75% of my anticipated corn crop (based on APH yield) priced by June. Price 10,000 bushels at $5.00 cash price ($5.50 Dec. futures) using forward contract/futures hedge/hta contract Price 10,000 bushels at $5.40c/5.90f, or by Mar 17, pricing tool tbd Price 10,000 bushels at $5.80c/6.30f, or by Apr 15, pricing tool tbd Price 5,000 bushels at $6.20c/6.70f, or by April 30, pricing tool tbd Price 10,000 bushels at $6.60c/7.10f, or by May 14, pricing tool tbd Price 10,000 bushels at $7.00c/7.50f, or by May 28, pricing tool tbd Price 10,000 bushels at $7.40c/7.90f, or by June 13, pricing tool tbd Plan starts on January 1, Earlier sales may be made at a 50 cent premium and would be limited to 30,000 bushels. Ignore decision dates and make no sale if prices are lower than $5.00 local cash price/$5.50 December futures. Exit all options positions by mid-september Dec 14 corn - $5.06 Soybeans 2014 Pre Harvest Marketing Plan Objective: Buy crop insurance to protect my production risk and have 75% of my anticipated corn crop (based on APH yield) priced by June. Price 2,500 bushels at $11.10 cash price ($11.90 Nov. futures) using some form of fixed price contract: forward contract, HTA, sell futures Price 2,500 bushels at $11.80c/12.60f, or March 17, pricing tool tbd Price 2,500 bushels at $12.50c/13.30f, or by April 15, pricing tool tbd Price 2,500 bushels at $13.20c/14.00f, or by April 30, pricing tool tbd Price 2,500 bushels at $13.90c/14.70f, or by May 14, pricing tool tbd Price 2,500 bushels at $14.60c/15.40f, or by May 28, pricing tool tbd Price 2,500 bushels at $15.30c/16.10f, or by June 13, pricing tool tbd Plan starts on January 1, Earlier sales may be made at a 75 cent premium to price targets noted above and be limited to 10,000 bushels. Ignore decision dates and make no sale if prices are lower than $11.10 local cash price/$11.90 November futures. Exit all options positions by mid-september Nov 14 soybeans - $

12 Spring Wheat 2014 Pre Harvest Marketing Plan Objective: Buy crop insurance to protect my production risk and have 75% of my anticipated wheat crop (per APH yield) priced by mid-may. Price 5,000 bushels at $7.10 cash price/$7.60 Sep wheat futures using some form of fixed price contract: forward contract, HTA, sell futures Price 5,000 bushels at $7.70c/$8.20f, or March 17, pricing tool tbd Price 5,000 bushels at $8.30c/$8.80f, or by April 15, pricing tool tbd Price 2,500 bushels at $8.90c/$9.40f, or by May 14, pricing tool tbd Plan starts on November 1, Earlier sales may be made at a 50 cent premium to price targets noted above and are limited to 15,000 bushels. I will consider the December futures contract for new crop sales at a 15 cent premium to September. Ignore decision dates and make no sale if prices are lower than $7.10 local cash price/$7.60 September futures. Sep 14 HRS wheat - $7.40 Quiz Time! What made Oheyawahi the hill much visited? What made Oheyawahi the hill much visited? 12

13 Minneapolis Fort Snelling 13

14 Quiz Time! Is this another Golden Age of Agriculture? Louis Hilden, circa 1918 Anna and Lars Hilden, circa

15 Summary The corn basis is upside-down Soybeans are hot, and high prices relative to corn and wheat point to more soy acres Don t forget 2014 pre-harvest pricing Is this another Golden Age of Agriculture? 15