The market has blown through what most experts thought the market could decline this year. Farmers i believe are taking serious licking on their income and bottom lines. Sure there has been some people that have sold a head but my guess thats small percentage of farmers and most of us haven't market that far ahead we as farmers are resistant to taking extra risk of marketing a something that hasn't been produced or can be estimated within in small window ahead. This is because we have seen over years that crop can disappear very quickly from number of risks in growing a crop.
This gets me back to coming year were looking at markets that are below cost of production at least for us in ND. Our basises in ND and discounts on crop have put a price on our crops that are lower than they were before pre good times we have had here. Wheat has sold here for below 3.00 bushell after discounts. Spring wheat here that has good test weight above 59 lbs, less than ,5% damage, good falling numbers but has low protein of say 11.5 to 12 are being discounted 2.00 to 2.60 a bushell. Corn has market price of $2.15 to @ 2.25 a bushel now at the elevator. Soybeans are in 8.70 range this fall. NOw look at next years futures with these basis levels and discounts there is no profit to be found in growing these three major crops. What is going to be strategy to market crop for coming year when prices are below cost of producing the crop and how will lenders respond with this scenario facing this winter for coming year. I believe this has to be case else where in US and probably with other world producers for the coming year.
I am sure there be alot of traders that will respond with how should have done this and that to market ahead but my experience has been over years farmers that trade like that soon become speculators and some point they loose their behind. For most farmers were extreme bulls and if youre farming fair acreage our time is spread pretty thin both bad combinations when trading in the market. But getting back to 2015 marketing and our cost of production i don't see alot of options to market new crop and cover the costs as it stand now. I am betting when everybody gets done with this years harvest and starts putting the numbers together for this year and next year were going to see the posts about this problem.
I also don't see this from our suppliers of seed, fertilizer, and chemicals that market has changed what they were recieving is going to also have to decline. They keep telling our local dealers that people are going to make money because of big crop and they don't see a problem. I do know that farm lenders are very worried and this is going to addressed in coming months. I also believe that equipment dealers are seeing beginnings of this turn and by next spring they will reallly seeing the down turn when future sales drop and they have to have more margin for trade when machinery prices beging falling on the used market.
I would appreciate here how some of you are going to handle coming year and strategies for marketing this years crop and next years crop. I hate to be this negative but numbers were looking at its hard not to be negative and i don't see how were going to adjust expenses and revenue quick enough for coming year.
Re: 2015 marketing
That is good part of crop insurance but it fails on regional basis in that doesn't cover you for discounts like we have seen in wheat. We have been experiencing low protein last few years with cool wet seasons here and the discounts have been heavy and since it has been recurring issue holding the crop until next crop to either blend or discounts to disappear has not happened. Right now were taking 20 cent a fifth drop in price for protein from 14. There's no quality ajustment for that with crop insurance. The price difference right now here if you have 12 protein wheat is $3.80 a bushel to 15 pro is $7.20 a bushel. The difference of 90% in spread in price. If we had revenue protection from 14 protein to the 12 protein based on current price to that of crop insurance we would have adjustment of 46% on guarantee and i would figure we would have had a payment of $60.00 which ironically is about what we are loosing in cash as crop stands now. This is the problem with revenue protection of crop insurance it doesn't cover things like protein discounts that region or area may be experiencing and there's no way to cover that risk in marketing. We never know what quality discounts were going to expeerience from year to year.
Re: 2015 marketing
I am a pretty small farmer now, as I get closer to retirement, so my actions are likley not typical. Starting in 2015, I won't be paying any rent.
I do not have any corn sold for 2015 and my plan is to watch the market for chances to sell in the spring, about like normal.
I have well over half of my 2015 soybeans sold on the board. Most of the sales are above 9.70l, some are above 9.50, and one is at 9.33 (dosn't look like a very smart sale).
One of my weaknesses is not watching the markets well enough to get out if the board goes against me, but being this much sold this far out, I'd better learn my lesson before it gets expensive. If beans get really cheap and I get nervous, I may cover the sales with a call, but that is usually not a good move for me. What I should do is put in a buy order at a ridiciculous price and if it touches I should rejoice.
I am not going to change my rotation from 50-50.
My situation is not like most others, as I am winding down and don't have the same overhead as others do. Naturally, that means I see the market differently and make different decisions that someone with a few thousand acres, much of it rented, so I'm not sure there is much to be learned from my example.
Re: 2015 marketing
Thanks for sharing your thoughts. Can you grow rye grain in ND? Cover crops are a rapidly expanding in the east and some here in the midwest. I am paying over $20 a bag, up from $8 a few years ago. Rye grain is the "super star" of cover crops. Seems like my supplier gets them from N or S Dakota. What about oats?
My stategies for both buying seed, chem, and fertillzer and marketing my 2014 crop, is to wait on the sidelines. I'm not ever sure yet what my crop rotation will be. May buy some supplies in Dec.
I'm willing to take some risk here until the dust settles a little.
Our big concern just now is to get the crops out of the very wet fields here in cia. Lots of tracks going on combines to get through the soft spots, black rutty scars all over the fields. Thankful for the good yields here. Best wishes.
Re: 2015 marketing
If you are a winter wheat grower ---- Rye can become a nightmare to get rid of.
I am certainly not opposed to cover crops -------- Rye was tried in our area in the 1960's as a cash crop and we had neighbors who could not market wheat for several years.
Re: 2015 marketing
let's say your APH is 180 bushels per acre...spring price was 4.62, and you have 85% coverage
so your guarantee is:
180 x85% x4.62 == $707 per acre
this fall you harvest 190 bushels per acre and the October crop insurance price turns out to be $3.50
so that is $665
you will get a payment of $42 per acre
IF the yield was 170 bpa, then your payment is $112