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As summer moves along, farmers provide us with insight as to how they believe their crop is progressing. We have found that, in general, our farmer customers provide good information and insight on their crops and crops in their area. They have a good pulse on crop conditions, but sometimes are largely inaccurate when estimating yield. One need to only look at last year and the phenomenal yields compared to expectations. The year before was an exceptional crop with all-time record yields, yet no pre-harvest estimates came close to final results. We also believe farmers have a tendency to be conservative when estimating their yield. They have good reason; who wants to be disappointed when actual results are lower than expected? Conservative yield estimates sometimes sway marketing decisions when price offers an opportunity. This is something to think about in future years.
Price rallies much above $2.75 for December corn have been difficult to achieve. In fact, one can count (on one hand) the number of times over the last ten years this has happened. In addition, corn prices above $2.75 have always led to corn prices below $2.75. Again, something to think about. Here is another thought to consider when talking to your neighbors or other people on crop prospects. When they tell you that their own crop is good, but the crop elsewhere isn't, use this as a warning sign to be ready to sell. As an example, it may sound something like this, "Our crop is pretty good, but you don't have to go far and it gets worse." Usually when we hear this, it is a recipe for a bigger crop. It is also a rationalization why prices should move higher. Our point is to think about what they are saying and ask yourself how qualified they are when judging crop elsewhere. For this year, it is getting late in the growing season, and usually corn and bean prices do not rally much after mid-August. Nonetheless, there is nothing wrong with having optimism. We will be the first to suggest that the long-term demand picture certainly looks bright. Keep in mind, however, for the remainder of 2006, there is ample carryout. As harvest approaches, it is more likely that prices will move lower than higher. Are you prepared? If you are going to store, consider selling in the future to take advantage of the carry. Again, just something to think about. If you have any questions, comments or would like us to put together a plan for you, contact Top Farmer at 1-800-TOP-FARM, ext. 129. |
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