Don't look down-Roy Smith
The other day I saw an interview with an individual who was about to participate in a celebrity circus. His act was to walk the tight wire. When asked how he could take part in such a risky venture, he said that his dad always told him “Don’t look down”. I get the feeling that advice might also be true for farmers wanting to market corn this week. After a week that saw July corn futures drop 81 cents in three days, there is plenty to be scared of.
The events of this week remind me of a similar time in 2008. That year, Sharon and I drove to Milwaukee via Highway 20. We could not go by the interstate because it was closed due to flooding. Cash corn bids were over $7, while we were on our trip. I came back so bullish it was scary. Fortunately, I had the self-discipline to price the last of my 2007 corn a couple of days before the crash that started a long down trend. The high in the market came when fundamentals were most bullish.
This week appears to be developing into a parallel to 2008. After all of the stress of trying to get crops planted, eastern Nebraska and western Iowa farmers are now suffering from flooding of historic proportions. Making it even harder to accept is that the precipitation that is causing the flooding took place in Montana. The weather event that is triggering the flood happened several hundred miles from where the damage is going to be worst.
I farmed several hundred acres of that river bottom for 30 years. Fortunately, I own a total of only 33 acres for which 20 acres are high enough that they are still above the water level today. I sympathize with the farmers and home owners who are losing everything. I attended a meeting of FSA and Army Corp of Engineers yesterday. A lot of people are looking for someone to blame. I have been in that situation myself. My only response is that there is risk in everything we do in farming. There is a reason that the area is called a flood plain.
The real losers in this disaster are those whose farms will no longer be farmable when the water goes down. Some farms will have so much sand accumulation that it will be impossible to remove enough to make them farmable. Some farms will actually be improved by the soil brought in with the water. Being downstream from the Omaha water treatment plant that is discharging raw sewage, I hope that my small piece of land is one of those more fertile than before.
It is difficult to pull the trigger on sales when production prospects look so bad. Normally that is exactly when it should be done. Selling grain from farm storage is one way to cope with this situation. Forward-pricing 2011 crop grain is much more difficult and risky under current conditions.