Corn & Sorghum Markets

Transcription

1 Grain Marketing Strategies for 2018 Examining 2018 Grain Sales Strategies Leonardville & Randolph, Kansas January 8, 2018 DANIEL O BRIEN EXTENSION AGRICULTURAL ECONOMIST Corn & Sorghum Markets

2 CME Corn Futures Weekly Chart: December 2008 January /8/2018 MAR 2018 $3.65 ¼ 2/8/2018 $2.90 $3.18 ¼ $3.01 $3.42 ¼ $3.65 Probability of Corn Futures Trends Examining (Last 28 years) Likelihood of Level-Higher DEC Corn Futures?? o Trends through Spring-Summer (June-July)? Spring-Summer Price occurred 28/28 Years (100%) o Which direction did prices move by Fall (Nov-Dec)?? Price moving sideways / higher = 9/28 Years (32%) Price moving lower = 19/28 Years (68%)

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4 Corn Cash & Futures Prices ($/bu) Junction City, KS Local Elevators February 8, 2018 Price $/bu $6 $5 $4 $3 $2 $1 $0 $ /mo $ /mo $3.65 $3.73 $3.80 $3.87 $3.95 $3.24 $3.44 $3.10 $1.95 Futures Low $ High $ Mktg Loan-Riley Co

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6 Kansas Corn Seasonal Cash $ Index Monthly: Long Term Average Kansas Corn Cash Prices 5, 10 & 15 Year Averages

7 Grain Sorghum Cash & Corn Futures $ s Dighton, KS Local Elevators January 2, 2018 $6 $ /mo Price $/bu $5 $4 $3 $2 $1 $2.88 $3.73 $3.65 $ /mo $3.73 $3.80 $3.87 $3.95 $3.30 $1.83 $0 Futures Low $ High $ Mktg Loan-Riley Co.

8 Kansas Sorghum Seasonal Cash $ Index Monthly: Long Term Average

9 Kansas Grain Sorghum Cash Prices 5, 10 & 15 Year Averages What Old Crop Corn & Sorghum Marketing Strategies are Likely to Work Best in 2018? For Old Crop 2017 Feedgrains On-Farm Storage Yes, but not until spring-summer 2018 Off-Farm Storage Maybe, but will need larger 2018 rallies Storage Hedge / Fwd Contract Maybe futures have carry! Buy Puts or Marketing Loan No Mktg Loans (Watch put costs) Sell Cash & Buy Call Options Watch narrower Basis (Yes post sales*)

10 What New Crop Corn & Sorghum Marketing Strategies are Likely to Work Best in 2018? For New Crop 2018 Feedgrains Futures Hedge (HTA) Yes, but not until spring-summer 2017 Forward Contract Maybe, but watch for better basis bids Buy Puts spring/summer rallies Marketing Loans Be aware of Mktg Loan$ vs Net Put$ Fwrd Contract + Buy Calls No if wide Basis (+ rally protection) Wheat Markets

11 CME Kansas Hard Red Winter Wheat Monthly Chart: December 2008 January /7/2018 MARCH 2018 $4.81 2/7/2018 $6.01 $4.59 $3.67 $4.81 Probability of HRW Wheat Futures Trends Examining (Last 28 years) Likelihood of Level-Higher JULY HRW Wheat futures?? o Trends through Spring (March-May)?? Spring Price occurred 27/28 Years (96%) o Which direction did prices move by Summer (July-August)?? Price moving sideways / higher = 11/28 Years (39%) Price moving lower = 17/28 Years (61%)

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13 Wheat Cash & HRW Wheat Futures Junction City, KS Local Elevators February 7, 2018 $10 Anticipated VSR Affect!!! Price $/bu $8 $6 $4 $2 $ /mo $ /mo $ $0.06 /mo 33 /mo $4.81 $4.96 $5.12 $5.27 $5.46 $4.39 $4.43 $4.40 $4.14 $2.96 $2.96 $0 Futures Low Price$ High Price$ Mktg Loan-Riley Co.

14 Kansas Wheat Seasonal Cash $ Index Monthly Prices: Long Term Average

15 Kansas Wheat Cash Prices 5, 10 & 15 Year Averages What Old Crop Wheat Marketing Strategies are Likely to Work Best in 2018? For Old Crop 2017 Wheat On-Farm Storage By now are waiting for Spring 2018 rally Off-Farm Storage Ditto on-farm, but need larger 2018 rallies Storage Hedge / Fwd Contract Hedge w. open basis (HTA) Buy Puts or Marketing Loan? Mktg Loans** (only buy put if LDP) Sell Cash & Buy Call Options wide Basis (but do if after sales)

16 What New Crop Wheat Marketing Strategies are Likely to Work Best in 2018? For New Crop 2018 Wheat Futures Hedge Yes, but not till Spring 2018 (watch basis risk***) Forward Contract Maybe, but watch for wide basis bids Buy Puts Spring 2018 rallies Marketing Loan A 2 nd or 3 rd best cash strategy (end dates?) Forward Contract + Buy Calls wide Basis (+ rally protection) Soybean Markets

17 CME Soybean Futures Monthly Chart: December 2008 January February 7, MAR 2018 $9.83 2/7/2018 $9.83 $7.76 ¼ $8.53 $9.00 ¼ Probability of Soybean Futures Trends Examining (Last 27 years) Likelihood of Level-Higher NOV Soybean Futures?? o Trend through Spring-Summer (May-August)?? Spring-Summer Price occurred 23/27 Years (85%) o Which direction did prices move by Fall (Oct-Nov)?? Price moving sideways / higher = 12/28 Years (43%) Price moving lower = 16/28 Years (57%)

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19 Soybean Cash & Futures Price$ s Junction City, KS Local Elevators - February 7, 2018 Price $/bu $15 $12 $9 $6 $3 $ /mo $ /mo $9.83 $9.94 $10.04 $10.06 $10.01 $10.04 $8.91 $9.15 $8.85 $4.92 $4.92 $0 Futures Low Price$ High Price$ Mktg Loan-Riley Co.

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21 Kansas Soybean Seasonal Cash $ Index Monthly Prices: Long Term Average Kansas Soybean Cash Prices 5, 10 & 15 Year Averages

22 What Old Crop Soybean Marketing Strategies are Likely to Work Best in 2018? For Old Crop 2017 Soybeans On-Farm Storage Yes, risk to 2018 So. America crop Off-Farm Storage Ditto On-Farm storage but at higher costs Storage Hedge / Fwd Contracts?? futures are flat! Buy Puts or Marketing Loans Yes Buy Puts (No Mktg Loan) Sell Cash & Buy Calls Use after cash sales IF mkt rallies What New Crop Soybean Marketing Strategies are Likely to Work Best in 2018? For New Crop 2018 Soybeans Futures Hedge??? How much risk of low fall 2018 $ s? Forward Contract Ditto, but watch for wide fall 18 basis bids Buy Puts spring/summer rallies Marketing Loans Extremely low Mktg Loan$ vs Net Put$s Forward Contract + Buy Calls Use as post-fc rally protection

23 Questions? Daniel O Brien Kansas State University KSUGrains on Twitter Daniel O Brien on Facebook