1) WEATHER! General rains will be needed in many areas soon, which are as of now in the forecast
2) Demand: will buying pick up before the August 12th Reports? Watch basis closely.
3) Funds are still long, are they buyers or sellers?
4) Crop conditions updated every Monday afternoon- rising or falling?
5) Eastern corn belt crops are very good overall, and forecasts are favorable, but Iowa remains the question. Crop tour reports will be coming soon
6) Spring wheat crop is perhaps one of the worst ever, but soft wheat yields were very good. Quality is an issue in areas that had too much rain. Will more be used for feed?
While we look forward to the 12th, in the meantime we need to also work on our marketing plan, as actions will be needed soon. If you recall previous ideas we put out, and sold September futures or wrote HTA corntracts for September, then these need to be rollled before first notice day on August 27. At one time September was trading 30+ cents over December, and as of this writing, is now trading at a penny carry. We can't tell you when the exact best time to roll is, we want the most carry can get, and looking back at 2013 when we had similar price action, the spread went to a 10 cent carry about mid August. Again, we cannot predict the future based on previous results, but suffice it to say, the 30 cent advantage of selling September over December was worth $60 per acre on 200 bushel corn. We don't want to wait too long to roll these contracts, as the closer we get to delivery, the more erratic the trades can become, so make sure you get this done or have orders in at a price you are happy with. Those who sold September and bought December 22 as a spread may want to roll the September to December 21 to keep some hedge protection in place for August 12th. Call us for up to date ideas, these spreads can change quickly!
Along with rolling contracts, it is also time to do our pre harvest checklist on our marketing plan:
1) Yield estimates, available storage, and how we want to use it.
2) Local basis and posted drying and storage costs: how badly do they need corn in your area? Are there bargains on drying and storage costs available?
3) Crop insurance update: will you have a claim and how does your protection coincide with your futures/option positions?
4) Cash flow needs: how far out can I roll my hedges before I need cash? Do I want to move corn or beans first? Which is easier or cheaper to re own and which offers the best pay back for storage?
5) Compare cash bids for each month, look at multiple delivery points if possible. Do your contracts have flex delivery terms?
On our farm, we are content to have our entire corn crop sold or covered with futures, options, and spreads, and are 50% sold on new crop beans now, but are waiting for a rally in November beans to add. $14 + will get our attention, but as we have been trending drier, are not willing to sell any more cash beans until we are more confident in yields. We will be watching the spreads for available carry to take advantage of, and rolling out our September hedges targeting 10 cents, but willing to take a little less as time goes on. As the list above outlines, we want to add as much as possible through basis and carry, and maximize our storage revenue. 8 or 10 cents here and there add up to big money, we don't want to pass this up!
In conclusion, prices are profitable, and we want to make sure we take advantage. We cannot rule out fund selling nor can we rule out China going on a big buying spree. Making sure we have a floor in place corn rallies back to recent highs has merit in our minds, and selling beans above $14 does too. We know the South American producers will be anxious to plant every acre with these prices, we cannot underestimate producers going all out to produce. Thats what we do when prices are profitable. Take a look at next years numbers in terms of expenses and grain prices: you may want to consdier doing a little hedging there as well. Above all, take a look at the balence sheet, forget what the past was, and look forward to what you can have now. It is a futures market, and we don't get any "do overs", just opportunity at any given time.
Dates to Remember:
- Every Monday: Export Inspections, Crop Progress
- Every Thursday: Export Sales and shipments
- August 12th: Monthly Supply/Demand Report and Crop Production
- August 20th: Cattle on Feed
- August 27th: September options expire