Multi year sales ?

[elcheapo]

I am reminded of the saying "make hay when the sun shines"....but then again baling at night holds the leaf on better.

With prices now at "good" levels, should we be locking in prices for the next couple years... 

But then again, another saying comes to mind 

"Dont count your chickens untill they are hatched"

[BA Deere]

[erikjohnson61y]

“Prediction is very difficult, especially if it's about the future!”   

~Niels Bohr

[Hobbyfarmer]

Right now I'm concerned about this years sales of last falls crop.

Delievery is challenging.

Hrs long wait at ADM Des Moines.

Worse in Kansas City.

Train loader in Creston Iowa shut off bean delievery again.

Being in a fringe area with high flood potential I think I 'll grow it before I sell it. Been working out so far.

[sw363535]

I have a memory that happened in 2006-7 approx.   First time in my life I had a chance to sell 3.50 corn and sold the on hand corn.... I was excited so I priced a little for the fall on contract.  5 months later I got the pleasure of delivering $4.60 corn to a 3.50 contract.  When your margin is about 40 cents.........the memory stays with you.  AND THAT WAS A MUCH MORE STABLE MARKET THAN THIS IS GOING TO BE.

Raise what you can and sell it when it is profitable....... Right now no-one knows what the expenses will be in 6 months.  Or if the world will even want what we raise.  I am trying to be kind but we don't have a clue what the future is and the fools of the world think the climate is our biggest problem.

[erikjohnson61y]

Agree. Saw an article right here on SF that said in parts of Africa, they used to leave land fallow to let it recharge to make better crops when it was planted. But now due to an increasing population they plant every year, and yields are dropping, so obviously climate change is impacting their lives.

WhiskeyTangoFoxtrot??? (pardon my french) (SF deletes it if I write it as the three letter acronym). Where were these people when they were passing out critical thinking skills? They keep talking about CC impacting yields here, but the trend is still up up up. In that '07-'08 time frame I was just starting to get consistent 100+ corn and 40+ bean yields. Now, on the same ground, I've hit 60 bu beans and 200bu corn twice in the last 4 years. Not consistently there yet, but I wouldn't bet against it happening in the future.

[rickgthf]

Below is a chart of the USDA ave market year corn price received since 1960.  I count six highs in the past 60 years, one every ten years or so.  It certainly suggests multi-year sales should be considered if you expect to be farming long enough.

[k-289]

Climate  fools  and  fools  that  abundant , fresh  water ,  west  of  US  I -25  was  a  boogie  man  story  -  -  -

Now  loo''kk''ing  in  the  pool  side  of  Hoover  Dam ,  hold  the  phone   -  -  -

[sw363535]

Rick-----

With a bit of late night clarity let me try to explain why that chart makes no difference....

If you forward contract every year since 1960.  Think about it this way......

Your selling this years crop on last years market every year and paying next years expenses every year.

That in itself almost guarantees loosing money much of the time if not every year..... and every time the price runs up you miss the increases for the first year and pay the cost increases the same year.

Add to that I am writing from the perspective of the high plains where drought or hail will wipe out one crop out of five or six.  That year you get to loose money double.... crop insurance will only cover 70% of the loss and you still have to pay the rise in price to buy next years grain to deliver to last years contract.....   a double loss.

[erikjohnson61y]

If you could market ahead at current or with carry prices, that would be one thing.  But Basis nails you.

Current Corn - $7.59

Dec '22 - $6.17

Dec '23 - $5.65

Dec '24 - $5.01

So from now to Dec '24 is a steady 7.8cent/bu/month loss. That's worse that the storage fees at the elevator!  The one year it might have paid off was 2012 - the drop to '13 and '14 in the market was possibly worse than the basis drop had you done a multi-year sale.  

With high fertilizer prices compounding the weather problems, I don't see a bumper crop this year in either beans or especially corn. If wheat keeps going limit up every day, we might see a lot of guys plant spring wheat if they can't get or can't afford the fertilizer corn needs.