Issue 31
Marketing Guide 2000
 

Prairie Grains is the official publication of the Minnesota Association of Wheat Growers, North Dakota Grain Growers Association, South Dakota Wheat, Inc. and the Minnesota Barley Growers Association.

Copyright
Prairie Grains Marketing Guide
2000

Use these charts to estimate expected net price, plan sales

By Tracy Sayler

You can estimate expected net prices for wheat, corn, and soybeans for any given months in the future, thus helping to plan grain sales, using these charts created by NDSU extension crops economist George Flaskerud as a guide.

Here's how the charts work: In the first column, Calendar Month, pick months into the next year that are likely times in which you would sell grain, and hence, would like to estimate the net price you'd receive. In the wheat example, the calendar months of August, December, February, April, and June are used.

Planning Soybean Sales at Hunter, ND (6/19) Calendar   Month Nearby Futures + Nearby Basis + Expected Price = LDP Value + Storage Costs - Expected Net Price = Oct 4.97 -.80 4.17 1.000   5.17 Dec 5.07 -.65 4.43 1.017 .224 5.22 Jan 5.14 -.63 4.52 1.025 .263 5.28 Mar 5.19 -.69 4.50 1.042 .342 5.20 Jun 5.25 -.56 4.69 1.067 .462 5.29

Planning Wheat Sales at Hunter, ND (6/19) Calendar Month Nearby Futures + Nearby Basis + Expected Price = LDP Value + Storage Costs - Expected Net Price = Aug 3.31 -.52 2.79 .30   3.09 Dec 3.57 -.32 3.25 .31 .203 3.36 Feb 3.57 -.33 3.24 .315 .261 3.29 Apr 3.60 -.26 3.34 .32 .318 3.34 Jun 3.63 -.37 3.26 .325 .376 3.21

Planning Corn Sales at Hunter, ND  (6/19) Calendar Month Nearby Futures + Nearby Basis + Expected Price = LDP Value + Storage Costs - Expected Net Price = Oct 2.24 -.69 1.56 .35   1.91 Dec 2.35 -.59 1.76 .356 .130 1.99 Feb 2.35 -.60 1.76 .362 .163 1.95 Apr 2.41 -.60 1.81 .368 .196 1.98 June 2.46 -.44 2.02 .373 .230 2.16

The Nearby Futures price for each corresponding calendar month is entered in the next column. Here, the settle price is entered using the closest futures month to the calendar month in the first column. For August in the wheat example, that would be the Minneapolis September futures price on the day this chart was created, which was $3.31. For December, the nearby futures month used would be March, with a price quote of $3.57 on the day this chart was created. February would also use March. The May futures price was used for April, and the July futures price for June. Most daily newspapers publish the grain futures prices you would need to do your own sales planning charts.

In the third column is the Nearby Basis, which is the difference between the futures and your local cash price. Here, enter your local average basis for each calendar month listed in the first column. In the wheat example, the basis in August at Hunter, ND is 52 under; the basis in December at Hunter is 32 under, and so on. Your local elevator would know these numbers. You can use last year's basis numbers, or averages from the last three or five years.

In the next column, add the Nearby Futures numbers with the Nearby Basis numbers to calculate an Expected Price. Thus, for August in the wheat example, the Nearby Futures price of $3.31 plus the Nearby Basis of -52 equals an Expected Price of $2.79.

After you've calculated the Expected Price for the Calendar Month in each row of the chart, add the LDP Value, if you indeed take the LDP on that grain. An LDP of 30 cents in used for August in the wheat chart. The LDP Value increases slightly with each Calendar Month to reflect interest earnings or savings from the income received by the LDP.

Next, subtract Storage Costs for each Calendar Month in the chart. There would be no storage cost if you sell off the combine. Use the Storage Cost estimates Flaskerud provides in these charts, your own storage cost estimates, or estimates from your local elevator, lender, or farm business management or extension educator.

The final calculations give the results we want in the final column of the chart, Expected Net Price.

Here's one final example from start to finish, using the soybean sales planning chart: To figure the Expected Net Price for soybeans in the Hunter, ND area for the Calendar Month March, 2001, add the Nearby Futures price of $5.19 (most recent settle price, using Chicago May soybean futures) with last year's soybean basis for Hunter in March (Nearby Basis) -69, equals an Expected Price of $4.50. Adding an LDP Value of $104.2 (reflecting 4.2 cents of interest savings from the LDP income received at harvest) and subtracting an estimated Storage Cost of 34.2 cents, the Expected Net Price is $5.20/bushel.

Note that these are only estimates to help with sales planning. Other factors such as quality premiums/discounts and government support income are not included.

Questions? Contact Flaskerud by phone, 701-231-7377, or by email: gflasker@ ndsuext.nodak.edu