cancel
Showing results for 
Search instead for 
Did you mean: 
Veteran Advisor

Same Or More Grain Next Year

Prospects so far are for about the same or more corn and soybeans next year.

What do you think about that?

Some of you believe it is unlikely that we'll have another big crop - the odds are against it.  Remember, the odds of flipping a head or tail are 50-50 each time.  You can flip heads 5 times in a row and the odds of the next flip are still 50-50.

Well, how do we market this coming crop?  It's likely to be a challenge.

0 Kudos
10 Replies
Honored Advisor

Re: Same Or More Grain Next Year

Not worried about selling something that isnt even in the bag at the seed company yet.

 

Have a neighbor that used to farm thousands of acres, so hyped up over these types of sales he completely missed the good times. Spent the great price year's at one to three dollars under priced. Broke him. Sold every year too soon.

0 Kudos
Veteran Advisor

Re: Same Or More Grain Next Year

What is selling too soon?

Planting and hoping for higher prices is surely not marketing.  It's living in dream land.

Maybe we are reduced to selling when we can cover the cost of production, as much as I don't believe in that ivory tower idea.

One option may be to market as well as one can whenever one can and have another plan available to catch any unexpected improvement.

 

The right kind of crop insurance would help, I suppose (I don't know - haven't used it in years).

Forward sell the cash when one can cover costs or make a profit, then buy a call if one has a reasonable hope prices will go up.  Of course, if prices don't go up one is out the cost of the call and that might be all the profit.  It's not easy.

0 Kudos
Honored Advisor

Re: Same Or More Grain Next Year

Where do you come up with some of this stuff?

 

Just a feather duster whirlwind.

0 Kudos
Honored Advisor

Re: Same Or More Grain Next Year

I honestly do hate to say this, but I think we need to start out 2018 in the spring and figure a 175bu nat average corn yield and only deduct from that as conditions warrant.  Farmers and technology show every year that weather matter less and less, I`d love to see what the yield from a "1987" or even a "2012"  would be using 2018 seed and technology.  

 

And you look at the 2017 growing season, it wasn`t that terrific, but you look at the record breaking yields that came out of no where, you scratch your head it defies the Second Law of Thermodynamics. We haven`t broken a new price plateau, but unfortunately we have broken a new yield plateau.

 

In short this hoping for a drought won`t bail us out like we might think.   So am I gonna "sell too early"?  Naw, I`ll do like always stand like a deer in headlights and let the 50 cent below cost of production prices pass me by and spend the next year complaining about it.   "Yeah, I knew prices were gonna suck and didn`t do anything about it, but by God I was right!".    Smiley Happy

0 Kudos
Honored Advisor

Re: Same Or More Grain Next Year

A bad fallacy is to think that you can lay off risk by having production priced before it is planted.

 

It is a wonderful guarantee to the corporate buyers but doubles the risk for the producer..

 

We should all trade locations occasionally, just for educational purposes.

 

Jim must have never had a crop failure in his life.

 

Those are the guys who love to lock in "profit".

0 Kudos
Honored Advisor

Re: Same Or More Grain Next Year

At usda there will be more grain next year......... so answer is More. more more.

 

Either here or SA or Maryland, or Mexico.

0 Kudos
Veteran Advisor

Re: Same Or More Grain Next Year

Come on, SW, you buy crop insurance as a way to lay off risk by having production priced before it is planted.  

 

I've had two notably bad crops.  1993 with the rain and 2005 with drought.  In both cases, I found out that my little pot of trouble was not enough to move the market.  I not only grew less, but I also did not get any more for it.  It taught me that to hope that if production is low prices will be high is a pretty narrow window.  It seldom happens that production is low all over.

 

I personally don't lock in a profit and don't believe in it - I said that up front.  But if a person can lock in a profit maybe 2018 is a year to consider it.  That is what I said.

 

On the other hand, as I've said on here many times, I do sell early and sometimes it's too early.  Too early can mean so early that I locked in a loss or too early can mean that I didn't get the price I could have had I been more patient.

 

 

0 Kudos
Honored Advisor

Re: Same Or More Grain Next Year

Come on, SW, you buy crop insurance as a way to lay off risk by having production priced before it is planted.  Sorry I have never had the illusion that crop insurance in the form we have now, lays off risk.  Good sales pitch ----   Premiums go up immediately for those who have claims increasing risk for that individual and giving risk bonuses to those who do not have claims...  It is so missunderstood that locally, this fall, I listened to an agronomist advise a customer not to file a claim that was going to pay him $150+ per acre for corn because it would hurt his lofty APH.  

If that was good advice then why pay the premium

Most of my life I have not purchased crop insurance, it is too expensive for dry land here.  and irrigated if you rotate crop -- imagine that.... if you continuous crop corn insurance is better...... because fields are penalized for not having corn history in those rotation years.  It takes a long time to build good yields and twice as long to recover from a loss.  So it encourages poor farming practices...  like stretching water too far instead of rotating water between two crops........ That agronomist has farms that have been in continuous irrigated corn production for over 40 years.  He seldom considers the cost.... mostly concentrates on the gross return and keeping the premiums lower.

Insurance you won't use is too expensive at any price.

 

I've had two notably bad crops.  1993 with the rain and 2005 with drought.  In both cases, I found out that my little pot of trouble was not enough to move the market.  I not only grew less, but I also did not get any more for it.  It taught me that to hope that if production is low prices will be high is a pretty narrow window.  It seldom happens that production is low all over.  --Stay on subject  were those two bad years enough to file an insurance claim.  That is picking an example that fits your premise.   and most important were there opportunities later in the year to price higher?   How did you get out of the over hedged position and how much did it cost you to buy those bushels back?   Did Crop insurance pay that hedge loss above the claim of an unhedged crop? or Did insurance cover the contract you couldn't deliver above what would have been paid on an uncontracted loss ?  You took on additional risk by pricing ahead, many claim they cover that additional risk,  but they don't.

 

I personally don't lock in a profit and don't believe in it - I said that up front.  But if a person can lock in a profit maybe 2018 is a year to consider it.  That is what I said.   ---- Of course you would if you could..... but you can't....... that is my point.  So why suggest that we can in the next sentence.........   something about candy and nuts.

 

On the other hand, as I've said on here many times, I do sell early and sometimes it's too early.  Too early can mean so early that I locked in a loss or too early can mean that I didn't get the price I could have had I been more patient.  

 

 Here we totally agree ....... early just means a year of discouragement... you either sold too much or too little and almost always......(ESPECIALLY this year) too cheap.   And it happens when we know absolutely nothing about the next crop.......... which means the main motivation is fear.   

I seldom loose money waiting, at least until spring.  May til July.  After that the buyers wait for the cheap harvest crop if they have locked in needs til september.  Lot more water under the bridge.  And I have a little more knowledge of my yields.... Planting is the most important event affecting yield.  

 

Yield.......... that is the single largest affect on costs and profitability...... It can change cost per bushel by 50 cents to a dollar.  Nothing else can do that.   I have some control over water,  if we get it planted timely and fertilizer in place by may 15 I have a pretty good idea of yield (within 10%), cost and therefore profitable price levels.  But until then I don't know for sure what crop we will rase or how much seed we will send back......... Within 4 miles of our grain storage there are irrigation fields of wheat, grain sorghum, sunflowers, cotton, corn, soybeans, alfalfa, triticale, silage sudan, irrigated grass for cows......... and for the first year in last 5 no potatoes.  Corn is popular because of feeders and ethanol,  but has to compete for acres.  2018 may be reduced acres of corn for the third straight year...  This year  if we continue the doom and gloom mantra.... $4 corn will probably earn some pre harvest sales this spring if we don't burn or blow out before then. And at 200+ yield levels will pay its way in our higher cost production.  And we hit 3.85 today Dec 15, add in our normal +25 basis levels locally we should be there...if we can get a lock on basis and hedge it.

I may hedge next spring, but today I would just be gambling on 2018 crop.............. It is 50+cents over todays cash price but that barely pays the storage on the 2017 crop.  So $3.85 next december is no better than $3.45 now.... When you here "capture the carry" it is just a push to get you to sell at the same price and store it for the end user..... You can rent out your bin space and make that 40 cents any time.  Point is they are not offering you a better price in the future.  

 

Grain bins and marketing the year after harvest provides best marketing options, but does not guarantee profitability.  and has the additional cost of the cash assets to finance the choice to delay.(some hidden cost)   

 

0 Kudos
Veteran Advisor

Re: Same Or More Grain Next Year

We're told crop insurance is like a put.  You don't agree?  For my own part, I haven't paid a premium for a number of years.

 

When I was buying crop insurance I think I had three claims.  One was when the county average program first came out - I bought it big and made a ton of money even though I had a very good crop.  Another was a bean claim that was the amount of the insurance - huh?  A third was for corn and I got some money over the premium.  Over the years it hasn't paid except for that one windfall - and they changed the program so I couldn't repeat it.

 

93 was a bad year for pricing because nobody believed the yields were down so much.  When the truth came out, I'd already sold too cheap.  There did arise an opportunity but I missed it.  I missed a bean contract and just paid the difference out of my pocket.  05 I had one poor field and the others were just good enough I didn't get anything.

 

My experience is selling early is often better than waiting with no plan and ultimately no hope, which is what is happening to some today.  I wish I'd sold more corn at 3.95 which I did last November.  

 

I don't have anything hedged today, but I have good-til-cancelled sell orders in already for 18.  If they never get touched, as time goes on I'll have to revisit them.  Hopefully prices will be better in the spring - they are most years but not every year.

 

 

0 Kudos