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SoyRoy: Grain Perspective Needed

05/30/2014 @ 2:00pm

From time to time, I find it helpful to look back at grain prices to compare the current levels to what has happened at some earlier time. That is especially the case in markets such as exist now. It seems as if the markets are defying logic with some of the moves seen recently. Thinking back to a meeting I attended in December, It seemed as if all players in the grain markets were bearish in their outlook for future prices.

By the end of January however, the attitude changed completely. Prices for soybeans, corn and wheat began a rally that took prices higher than anyone could have imagined at the end of 2013. That optimistic outlook has diminished considerably in the last month. The long term price charts that I use in my analysis warn that the high for prices in all three grains have very good odds of coming in the April through June period. While that is a big window of opportunity, the most likely period for the highs is mid- April through mid- May.

Odds are so good for prices during that time frame that my general recommendation is to make sales of cash grain sometime in April or the first week of May. Going back to the end of January, the cash bid for corn here in Cass County was $4.06. The soybean price was $12.35. BY April 30 the corn price had improved to $4.80. The price of soybeans had rallied all the way to $14.75. By May 1 it appeared that corn would soon be over $5 and soybeans would be over $15.00. Beans may have touched $15 for a short time during a trading session. However, by the end of May soybeans were lower and corn was considerably lower than in the middle of the month.

The big question to be answered is how to handle the lower prices now being offered. One possible approach is to sell everything at today’s price and be happy that prices are still considerably higher than they were in January. The thought of selling the 2013 corn crop for less than $4.00 certainly is enough to make farmers rethink their cash flow for the rest of the year. A second approach is to wait to make sales in the hope that prices will rebound. This is an easy solution because it simply says “Do nothing”. However, the potential for a price disaster is great if you are wrong and prices never rebound.  It brings to mind the possibility of “agricultural acupuncture”. That means getting stuck with last year’s crop! The fact that in many years the long term charts show a peak in prices sometime in the middle of June is an encouraging factor today.  However, the timing and duration of that rally is very difficult to predict.

An approach I favor and am implementing on my farm is to sell in increments. I started the sales on March 5 at $4.42. That was followed by sales later at $4.70 and $4.36. I still have one increment left to sell on a weather rally if one materializes. It is easy to look at this strategy and say that I did not get a very good average. However, I had at least one sale very close to the yearly high. I had no sales at the dreaded price below $4.00. If I could do it over again I would sell more at the $4.70 price and hold smaller increments going into June. Hind sight is always perfect. However no one is perfect when it comes to hitting the highest price of the year. 

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