At it again

Agriculture.com Staff 07/13/2007 @ 10:19am

When I went online to get my local co-op's cash grain bids today, I accidentally accessed an elevator website from central Iowa.

Before I realized I was on the wrong website, I read part of the information intended for their clients. What tipped me off that I was reading information from the wrong company was that they were promoting their free deferred pricing program for corn and soybeans. Knowing that my elevator does not offer free DP, at least not yet, I checked closer and realized that the elevators were not located in Nebraska.

What really caught my attention was that the free "storage" ends August 31. After that time, the grain must be sold. It cannot be put on commercial storage. It cannot be removed. It will be sold and a check issued, if not priced by the ending date. I see a big potential for farmers to procrastinate. By not being forced to make a decision, it will be easy to put off selling the grain and end up pricing it at a distressed level. There is no guarantee that prices will be low at the end of August. However, the odds are that futures prices will be low and basis will be reflecting farmers' rush to clean out bins for harvest.

In the "Marketing Stored Grain" workshops, I chart the cash corn price starting at harvest and going through the end of August. In the last 15 years, there was only one year when the greatest return for storing corn was in August. The line on the graph of net prices after storage and interest costs takes a sharp dive after the first of August. Only in 2001 was the highest return in August. In every other year, storing until August produced negative results.

Put in the simplest terms, odds are great that if you have unsold corn in your bins, you are better off the sell it this month than to put it into a DP program and hope that the price will go up. Delivering grain on a DP contract is a legitimate strategy but it heavily favors the buyer, not the seller. Also, the fact that the seller on a DP contract is an unsecured creditor in the event of business failure needs to be kept in mind.

The success of waiting until August to sell grain depends on the weather. Here in Cass County, we experienced another one of those frustrating situations yesterday afternoon when a very promising cloud came out of the north that obviously had rain in it. The cloud split and went around, dumping more rain in the Nebraska Kansas border area where they did not really need it. My daughter and son-in-law traveled to Iowa City on Tuesday. They said that the corn between here and Des Moines was showing a lot of stress. If the predicted heat materializes next week, those of us who missed these last rains will be calculating the size of our crop insurance settlements for this year's income!

When I went online to get my local co-op's cash grain bids today, I accidentally accessed an elevator website from central Iowa.

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