My main concern at this time is that we will never be able to “forget” 2012.
Talk about a wild ride!
The U.S. started the season with record numbers of corn and soybean acres planted followed by decent germination and growing weather. Prices responded as you would expect.
Then from mid- to late-June the spotty dry patches turned to wide-spread drought that persisted through harvest. Prices responded as you would expect if large acreage in a major production region were drought stricken.
What really hurt was that we had committed 2012 grain and took nice prices from spring into summer only to be overtaken by unpredictable supply change.
We delivered $5.50 corn at the same time the mill was paying $8-plus. We did make profits at $5.50, but it’s no fun leaving a couple additional dollars on the table.
Fortunately, we also marketed some bushels at these virtually unknown harvest prices.
I expect most of us had a great 2012 grain marketing season! The pattern of grain prices we experienced on the 2012 crops can be solely attributed to the extensive U.S. drought.
Are we anticipating a similar weather pattern for the 2013 growing season? Has demand been altered by recent historically high grain prices? Are global planted acres responding to prices?
I believe effective grain marketers take account current conditions and use pricing tools that allow for some flexibility, while covering expenses a little at a time as profit opportunities allow.
To me — this is centered on utilizing crop insurance at a level of coverage that meets our individual risk management goals. We can then commit early season bushels when prices meet our needs without fear of crop loss on our farms preventing us from delivering.
As an example, if I bought 80 percent coverage of RP crop insurance: it is reasonable that I might feel comfortable early season marketing 40-80 percent of my expected harvest — if and only if there are profitable prices to be had.
I did a little pencil pushing and calculate a 2013 cost-of-production at $5 for corn and $11 for soybeans, if I get an average yield. After I did this I looked at what my local cash buyers are bidding for 2013 crops.
At this time, I can take cash bids that are profitable for my 2013 expected harvest.
Many of us are enthralled by market prognosticators. They offer much advice on where prices are going and what we should do about it. I love to listen, but resist the urge to react to their words.
I remain convinced no one has the power to predict the future.
As we get serious about our 2013 farming, consider what price returns you need to make a profit, and then take profits as you can.
(You might also be interested in Grain markets beginning shift from tightness to 'more relaxed'. Also, China's 'extraordinary demand' has buoyed soybean market).