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Veteran Advisor

What Difference Do Current Prices Make To Producers?

I see a lot of attention to day-to-day price levels and for the life of me don't understand the significance.  Most years, grains have a seasonal price pattern.  Many of us have periodic, hopefully predictable expenses, such as taxes, rent, land payments, insurance bills, input costs and so forth.  Some are recurring, such as typical living expenses and some are one-time, such as seed or taxes.

 

If one plans for the times when income is needed and sells or hedges when prices tend to be higher, why do we care what the price is for any given day?  Why agonize over corn down a nickel or wheat up a dime?  We probably took out crop insurance (except for me) in March, maybe sold futures,. bought puts or forward sold corn in April-June/July when prices are usually better, and then executed our marketing.  Most of us are not selling grain off the combine without it being prior marketed unless we have a surprisingly good year, and then it's an opportunity lost but not money desperately needed that's gone away.

 

What am I missing about the day-to-day price ranges this time of year that I should be worried about?  The only thing I'm concentrated on is pricing the 2018 crop.  I have some sell orders in to my broker, but other than that there doesn't seem to be much to do.

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4 Replies
Honored Advisor

Re: What Difference Do Current Prices Make To Producers?

Well, when you had corn sitting in the elevator that you have to sell for cash, you are hyper watching the markets wondering when to pull the trigger before they start soaking you for storage. I get texts of the markets through the day and right after I`ve sold, I don`t even look at them, I don`t want to hear "corn is up a dime" the afternoon after I sold.  Smiley Happy

 

In farm country, you can`t escape the markets on the radio KROC, used to have what they called "commodacize" when they combined the markets with aerobics "November corn up 1...March corn down 2..."  .  KFMC classic rock station has markets often.  During Rush Limbaugh, Hugh Hewitt, Michael Gallagher, Michael Savage, Sean Hannity, Michael Medved, Laura Ingram  the stations give the markets often.

 

But, if you listen to the markets you catch that unexplainable 10 cent move and perhaps the start of a trend.

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Veteran Advisor

Re: What Difference Do Current Prices Make To Producers?

"Time" might suggest you sell the cash corn and reown it via a call.  I'm not a big fan of that strategy but I'm not a savvy trader, either.  If he is right, that is one way to get the storage monkey off your back.

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Honored Advisor

Re: What Difference Do Current Prices Make To Producers?

That might be a good idea of buying a call, especially in the upcoming 12 months.  The thing is, if you sold the corn in the elevator at $3.05 earlier that could pay for that call rather than selling cash at $2.90.  The higher your selling price, even though below "honest" C.O.P`s, the more avenues you can afford for hail Mary passes.

 

Here`s the problem with RA insurance this year, it just covers you during the month of October, after that the apron strings are cut.   That wouldn`t be a problem in most years as we`re done by Halloween...this year around here, you were lucky to be done with the beans by Halloween.  Corn didn`t get rolling until long after the insurance price protection was gone.   November 1st, corn price could drop to zero and RA insurance does nothing for you, what I thought was "idiot proof" wasn`t and I`m rethinking future insurance plans.  I`ve heard you can change price discovery months and may look into November price month if that`s possible, however most years October is a producer friendly month as prices usually bottom there.

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Veteran Advisor

Re: What Difference Do Current Prices Make To Producers?

If one is primarily a cash grain marketer, or has basis contracts, then the daily movements are important when the cash price reaches a range where one is ready to sell.  Beyond that, a penny here and a dime there, eventually establish a trend, range, etc.

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