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Drop dead date?

Agriculture.com Staff 06/13/2008 @ 9:25am

I have been a big believer in what I call "Drop Dead" dates. In other words, do not hold unpriced grain past a cut off date. In most years that date has been July 1 for corn. This coincides with the average date for a seasonal high of June 20 for corn and June 23 for soybeans.

My plan this year was changed a bit because I have old crop corn hedged in July futures to capture the carry from last fall. That has not been a pleasant experience! My goal to roll into a cash sale was a basis of 30 cents under or June 13, whichever came first. It appeared that my strategy was headed for success because the basis had been improving for the last month or so and was within two cents of reaching my goal.

However, with the sharp futures price increase this week, the basis has slipped back to 38 cents under the Chicago board. In other words, I lost six cents from my anticipated net price even as the cash price rallied sharply. It would be easy to say that I should not have been greedy. However, my basis target was conservative for this part of the country and my time target made sense from a seasonal standpoint. It gave me two weeks of cushion for the basis to come back.

The kicker in all of this is that I would like to get the corn moved before the summer heat makes the job more unpleasant. I am also tired of paying margin calls. This is the time when marketing becomes a management intensive operation. It is tough to keep a clear mind when a well thought out strategy gets side tracked as it has this week.

On a more positive note, the soybean and corn markets are acting just as the long term seasonal charts indicate they should this time of year. Markets get excited when weather problems threaten production. That is certainly happening this week. At some point the market adjusts to the changed conditions. When that happens, the psychology of the market will change. Whether the change comes today, next week or next month, it will be a surprise to the majority.

I continue to believe in my "Drop Dead" dates. At some point, prices will drop. When that happens, I do not want to be the one holding the inventory on my farm.

I have been a big believer in what I call "Drop Dead" dates. In other words, do not hold unpriced grain past a cut off date. In most years that date has been July 1 for corn. This coincides with the average date for a seasonal high of June 20 for corn and June 23 for soybeans.

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