What a year!
What a year it has been, and many are grateful 2020 is behind us. Yet, while the calendar year may have changed, the marketing year is far from over.
There have been pricing opportunities we never could have imagined. It all started with a freak storm in Iowa last summer that left its mark on prime farm ground and destroyed what was looking to be an outstanding crop yield for some. Then it turned off dry in August, the most important month for bean production. That produced a late-summer rally that has not looked back and is still going.
We saw a low in August for March beans at $8.75 and this morning at the time of this writing, March beans are trading at $13.40. Seriously? Following losses in production here, South America was hit with La Niña creating dry conditions for its planting and production cycle. Weather, combined with China’s increased demand for feed as it built up its hog herd once again, has created a perfect storm for a surge in prices. No one seems to know where the top is.
This was a year when re-ownership on paper really paid off. And, for the first time in several years, storing grain has also paid off. What does all this mean, looking forward, and what about pricing next year’s crop?
Well, until more is known about the South America crop production and what they will export, prices are likely to stay supported in the near-term. In addition, new-crop prices should stay supported until more is known about what will be planted here, and what kind of start we can expect to see during our planting time frame. In past years, when La Niña occurred, we saw an increase in moisture levels into spring. For many areas, rain is needed. If you’ve looked at a drought map recently, you’ve seen an increased concern for dryness in the Plains that is bleeding into Iowa and Illinois.
The other factor that has been affecting an increase in demand for our exports has been the drop in the U.S. dollar, making us far more competitive on the world stage.
All of these factors can change just as quickly as they arrived if the following occurs:
- South America’s production is greater than expected.
- We get off to a good planting season and plant more acres.
- The dollar bottoms and turns higher.
- Relations with China deteriorate, or they simply start buying from someone else.
You will still need a marketing plan, and try not to be a deer in in the headlights as you see these higher prices or assume new crop will have to reach levels old crop has. Look at your personal situation, and make sales where you can make a profit. Have calls in place for a summer rally and to give yourself the courage to forward price when the market hits your target. Have offers out at your elevator because with this type of volatility, prices could hit your target once and be done. The key is to not get complacent and think these prices are here to stay. Remember, it is a lot more fun to make sales as prices rally than to have to throw in the towel and make sales as they crash.
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