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Senior Contributor
Posts: 1,259
Registered: ‎12-17-2012
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$7.50 Corn at the Ethanol Plant

I am thinking of starting to dump/sell more of my 2012 crop corn. It is currently at $7.50 for delivery at the local ethanol plant. This works out to close to a $800/acre profit. Is this a good idea? Any thoughts or opinions from you guys that still are holding 2012 corn? $800/acre in profit isn't too bad, but do any of you guys think we will hit $8 cash corn again? Thanks for any thoughts or advice. It sometimes helps to get a 2nd opinion.

Advisor
Posts: 1,181
Registered: ‎06-30-2012
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Re: $7.50 Corn at the Ethanol Plant

just sell the whole **bleep** thing. Nothing wrong with profits, apple goes up almost everyday but guys who have the ipo sell it to manage downside risk. at 7.50 your in the top 10% of corn prices easily.

We may need some price rationing due to Friday's report.. and you may get 8 bucks, or you may not if you wait.

Marketing a crop is not a competition, it does not matter what price you get at the end of the day, only that you did what you thought was a good idea based on the relevant facts at hand (i.e. its historically high, high prices are the cure for high prices, etc, etc). If you read into posters like MT too much you get caught in an all or nothing position where you are either right, and look like a genius, or your wrong and you look like a moron; Nobody can perfectly predict the direction of a market, period, and its all a best guess based on information that generally has at least some influence. I

At least make some sort of sale, I know if I had more to sell at 7.50, I would not hesitate at all to sell er all, unfortunately, the best basis in Ontario was -30 until spring (then its -15! bc Ontario has 160bpa+- and another big crop/carryout). You can't make a mistake by taking some of your commodity risk off the table.

Maybe even beg for more money. I do it, and sometimes it works fine for me. No choice you make on marketing this corn will be wrong if the way that you make it is based on reasonable premises. If you roll a dice to decide to sell or things like your pride of being "the top seller", then your a moron; but if you make decisions based off of the fundamentals and the technicals, with your own idea of how those prices may change then there is nothing wrong with what you do. Its not what you do, its how you came about to realize that you needed to make a decision.

Advisor
Posts: 1,361
Registered: ‎06-25-2010
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Re: $7.50 Corn at the Ethanol Plant

Not a producer,but if you can make a profit at that price you are making good business decisions. 

Frequent Contributor
Posts: 55
Registered: ‎04-30-2012
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Re: $7.50 Corn at the Ethanol Plant

Now granted I'm a small operator and I only have 20% of 2012 un-priced, I'm holding for at least $7.75.  I agree that it wouldn't be a bad idea to sell some for you at $7.50 but everyone's reasons are different. I'm this far sold mostly for Tax reasons.

 

Local price is $7.30 today, but where can I get a better return on my money right now? CD's, Mutual Funds, Bonds?  I'm thinking the physical grain, easier to me than puts and calls.  It only takes 36 cents to make a 5% ROI and that has happened since Friday morning. So pull it out and put it in a 0.6% CD?Nope,  I'm ok with where I'm at but can you sleep at night.  I have plenty of profit locked in already.

 

I am thinking about dumping 20% 2013 corn for around $5.50 but haven't yet decided how long I should wait.

Senior Contributor
Posts: 1,572
Registered: ‎05-13-2010
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Re: $7.50 Corn at the Ethanol Plant

According to EIA, we ground 5.1% less corn last week for ethanol.  It was the smallest grind figure since EIA started tracking weekly grind which was the summer of 2010.  Unfortunately, ethanol stocks went up just over 3%.  There are rumors of a couple of NE ethanol plants suspending operations until margins improve. 

 

One can easily make an argument for corn going back to 8 bucks.  If the weather turns off wet about planting time which is is going to have to do in order to raise a decent big crop, then we will essentially have to stretch old crop corn 2 months as we gained one from last year's early harvest only to potentially lose one this next harvest.  If the weather doesn't turn off wet about planting time, then we're potentially screwed for a decent big harvest meaning old crop corn will more than likely take out all time highs.

 

One can also make an argument for corn prices stalling.  In the last round of USDA reports, the one that stuck out most to me was the hay and forage report which showed a 40 year low in inventories.  It is projected that we run out of hay and forage the first or second week of May.  This could potentially cause even further herd liquidations which will put a dent in corn feed usage.  Then, we have political fights on the way with regards to the debt ceiling.  I can't think a gov't shutdown will be positive at all for higher commodity prices. 

 

Rewarding the current rally seems like a good idea.  I wouldn't unload all of it due to the potential prices we could see if the stars align correctly, but selling a chunk now seems warranted.  Looking at the EIA reports and noting where gas prices are now compared to a year ago and such, ethanol plants could be in a potential pickle if corn prices ratchet up much more.  It also appears to me that soft wheat is now priced accordingly to displace corn for feed usage. 

Advisor
Posts: 1,181
Registered: ‎06-30-2012
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Re: $7.50 Corn at the Ethanol Plant

The only problem with this comparison is that you haven't made any money until you sell the grain. A bond is a guaranteed return. Grains may return more money, but may expose you to more risk if almost all of your worth is in physical grain and volatility is high. Going all in on one investment type is a way to break yourself or get rich, especially if you dont have other asset classes or other investments.

Being a young guy with almost all of my worth in ag, I seem to look for these things more often than maybe others. If you own other things that aren't related to ag, I can completely understand your unwillingness to let go of old corn, but for me, knowing that this is basically as good as it gets, I am prepared to let go, or else I may lose the profit to the volatility, and lose what I already have. To me, I will lock in 800 profits anyday. We generally make 200-400 out my way, but the cost ratios are essentially the same as the corn belt, if not better, in Ontario.

Dont forget.. as the markets go up, people get greedy, and wont let go of their corn, even if it makes logical sense to do so. and when it goes down, anxiety buidls, and builds, and builds, and then suddenly you lost 2/bushel on soybeans, or wheat, or corn. It takes a really strong person, with complete control of their emotions to make the right decisions. I know of plenty of guys that let their wives do the marketing, because they make better decisions than their husbands, because the husbands are too involved in farming, and the wives are looking at it from a logical point of view, usually from some other occupation.

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Senior Contributor
Posts: 1,572
Registered: ‎05-13-2010

Re: $7.50 Corn at the Ethanol Plant

Being a once proud owner of both GM bonds and stock, I can guarantee you that bonds are not a guaranteed return!  I'm sure there are others who once owned Greek bonds that can guarantee you the exact same thing.  In today's day and age, I'd rather be sitting on a pile of grain than I would a pile of paper bonds. 

Honored Advisor
Posts: 6,007
Registered: ‎07-18-2011
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Re: $7.50 Corn at the Ethanol Plant

I was there with you but I would not say proud.  Owned some stock---- never carried the credit card----------------our last GM was an 08------------I can say that proudly.

 

Banana republics 

Senior Contributor
Posts: 1,572
Registered: ‎05-13-2010
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Re: $7.50 Corn at the Ethanol Plant

Proud was a bit tongue in cheek.  I'm with ya.  I'll never own a post 08' GM product again.  I can't say I'll never buy a GM product again because some of their older models were really good reliable vehicles.  I just won't ever own one newer than an 08'.  I'm kind of a classic car nut, and I don't think I could ever part with some of my GM classics.  However, I don't even see GM as the same company from then to now.  I started to notice a massive decline in quality and performance of GM vehicles around the 2000-2003 time frame.     

Senior Contributor
Posts: 1,259
Registered: ‎12-17-2012
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Re: $7.50 Corn at the Ethanol Plant

Hey, thanks guys for your advice and opinions. I can make a darn good profit at $7.50. I had a 185bu total farm yield average in 2012 so that is $1,388/acre revenue and $812.50/acre profit after expenses. Anytime you can get over $800/acre profit the market should be rewarded with at least a 10-15% sale. I think I will make a 10% sale now and see how the market continues.Yes, you can't go bankrupt by making a profit. Thanks again for your thoughts and advice.