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Pencil sharpening time

Agriculture.com Staff 03/10/2006 @ 1:16pm

What an interesting time it is! There are so many things to think about this week that I could write several columns. This morning's government report gave us a glimpse current and anticipated grain supplies. My take on the numbers looks negative for soybeans. However, the market reacted positively in trading this morning. So much for logic!

This is the time of year when the prices of corn, soybeans and wheat futures normally go up. Odds of higher prices in March are about 70%. Prices have already rallied considerably from their early winter lows. I am not a technical analyst, but soybean futures charts look negative to me. The price could go either way. With the big projected carry over, it is hard to see how there could be a substantial move higher anytime soon.

Better grain futures prices this spring than last year lends optimism to the profit outlook. However, disastrous basis levels temper the enthusiasm. They also make sales decisions difficult for those with grain in the bin or who want to forward contract for new crop delivery. Corn basis at my local market is -.47. A good basis heretofore has been -.20 or better. Twenty seven cents added to the cash price would make a sale at this time look very good.

Soybeans are in a similar situation. Current basis is -.55, about where it was at the height of harvest last fall. Fortunately, I took advantage of the good basis during the 'Dead Cat Bounce' to sell my 2005 soybeans, so I don't have to sell into this distressed cash market. If I want to take advantage of the $6 plus November soybean bid, I need to look at using either futures or HTA and taking the basis risk myself. A good basis around here is -.30, so leaving the basis open should be a good bet. Getting a good basis on any sale this year may be a matter of being fast to recognize the opportunity and quick on the trigger.

Prices being better than last year also raise the stakes on crop insurance decisions. I have answered a lot of questions concerning various types of policies and ways to reduce premium costs without lowering coverage. I find that most farmers do not understand crop insurance beyond the basic CRC and RA/HPO alternatives. What is even more distressing is that many insurance agencies do not want to explain the alternatives to customers.

The March 15 deadline is next week. If you have not looked at all of the possibilities for your farm, there is not much time left. There is so much information available that it is difficult to digest in a short time. One individual told me that she could save 40% on premium cost without reducing the coverage by choosing enterprise coverage over individual farm coverage. While this is not true in every case, it is certainly enough dollars to be worth a few hours study.

It is time to sharpen your pencil or spend some time working on your spreadsheets to figure out the best strategies in marketing and insurance. There are a lot of dollars at stake. Time spent on the computer will pay off handsomely if the correct financial decisions are made now. Like all of you, I am getting anxious to start field work. Hours spent weighing the best possibilities in the next couple of weeks will be some of the most profitable time spent this year.

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Soybeans Rally on Demand, Weather