You are here
Your 2012 and 2013 marketing plans
As I wrapped up the 2011 cash sales in the last two months, I have focused most of my efforts on fine-tuning my marketing plan for the 2012 crop. I am also working on my 2013 plan and have begun looking at where to make some initial 2013 hedges.
December 2013 CBOT Corn
Following are my suggestions on how you can fine-tune your 2012 plan and how you can begin pulling together your 2013 plan.
Your 2012 plan
There are six factors you need to know when you're finalizing your 2012 plan.
1. Know your production costs per acre.
2. Know what your Revenue Protection (RP) crop insurance guarantee is at (mine is at $5.68 for December corn and at $12.55 for November soybeans).
3. Be able to estimate your yields to within 10% of what you will harvest in the fall of 2012.
4. Have about 40% of your 2012 crop hedged ahead at a price level that is well above your 2012 RP guarantee.
5. Know if the November 2012 to July 2013 soybean carrying charge is telling you to sell your soybeans right off the combine.
6. Know if the December 2012 to July 2013 corn carrying charge offers a return that suggests you hold your corn until at least March to July 2013.
“It's time to fine-tune your 2012 plan and to begin pulling together your 2013 plan.”
November 2013 CBOT Soybeans
2012 plan action steps
I suggest that you get 80% to 90% of your anticipated soybean crop sold for delivery right off of the combine or delivered in January 2013. If the market doesn't pay you to store soybeans, get them sold.
Place additional new crop corn hedges into the December 2012 contract. The current carry of just 24¢ to the July 2013 futures is not enough. Target getting that carry charge back to 32¢ to 38¢ before you roll your hedges.
I realize that in a world with a lot of financial uncertainty, getting good profits locked in and bank loans paid down are more important goals than ever.
Putting together the 2013 plan is more difficult, not only because the margins are tight but also because of all the unknowns that you have at this time.
Your 2013 plan
There are five factors you need to evaluate when you put together your 2013 marketing plan.
“The 2013 crop corn and soybean futures are trading at a discount to the 2012 crop futures.”
1. Be able to lock in most of your 2013 inputs for less than your 2012 input costs. The big variable is land rents, which for many farmers will not be set until March 2013.
2. Be aware that the global financial uncertainty continues. The Euro debt problems have been going on now for three years. This has rallied the dollar and slowed down global economic growth. This will limit how far grain prices can rally, and it could result in much lower prices in 2013, especially if China goes into a hard landing.
3. You won't know your revenue insurance price guarantee until March 1, 2013. So, you'll have a lot of risk until you know what the price level of that guarantee is.
4. With the current 2013 soybean corn ratio at 2.24:1, corn looks like it will make more money in 2013 than soybeans.
5. The 2013 corn and soybean futures are trading at a discount to the 2012 crop futures. You should be able to place some hedges at higher price levels during a North or South American weather scare in 2013.
Your 2013 action steps
I suggest you try and get your fall fertilizer prices locked in and check on the cost and availability of your seed for next year. If possible, get your land agreements signed for next year before harvest. If you can get all of that done, then you'll be more comfortable getting some 2013 hedges in place.
You cannot control the global uncertainty or know what your RP guarantee will be, so don't waste any nervous energy worrying about those two factors.
Watch the price of December 2013 crop corn if corn prices rally and the ratio gets down to 2:1. Shift more acres to corn and get a large part of those additional bushels sold ahead.
If you're able to get your inputs locked in and December 2013 corn and November 2013 soybean futures rally up to 20¢ of the contract highs, get 10% to 20% of your 2013 crop hedged ahead.
The bottom line is every farm is different in how it approaches marketing and how it evaluates its critical factors.
It is easier to put together a plan for a farmer in Michigan who has a good crop coming in the field in 2012 than for someone in Oklahoma who has watched his yields disappear. No matter what your yield prospects are for 2012, you need to evaluate your alternatives for 2013.