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

Get back on the marketing dance floor!

Yeah, you should have made some pre-harvest sales when you had the chance. But the band plays on, so plan your next pricing opportunities

By Tracy Sayler

So you missed out on pre-harvest pricing opportunities on your 2000 crops. No sense two-stepping the "Shoulda sold some when we had the chance" song now, however. The marketing band plays on, and you still have opportunities to get on the dance floor.

Before this year's growing season even started, NDSU extension crops economist George Flaskerud developed suggested selling guidelines—marketing plans, as they're often called—for wheat, corn, and soybeans produced in 2000.

The plan for each crop focuses on selling a percentage of your crop throughout the year, whenever key price objectives or time deadlines (based on times of the year when cash prices are usually the highest). Pricing strategies employed by the plan for each crop are set relative to a goal. For example, selling in the upper one­third of the price range for the marketing year. A more modest goal would be to sell the crop for a price above the seasonal average farm price. That's a seemingly modest goal, says Flaskerud, but challenging to achieve.

Strategy for 2000 wheat crop
Flaskerud set his wheat price objectives relatively high last spring, given dry conditions in winter wheat growing areas and concern of a lingering La Nina affecting weather. Thus, he advised selling 10% of your new crop wheat if the Minneapolis December futures price reached $3.70, or by April 19.  Then, to sell another 25% of your new crop wheat by May 17, or if the Mpls. Dec. futures price hit $3.80. 

Severe weather problems were not widespread, keeping market bulls in check. Price objectives weren't met, but two time-triggered deadlines for making forward sales did occur. "I don't think it was bad that we didn't price more than one third of the crop this spring, given the weather outlook we had. It still made good farm management sense," says Flaskerud.

If you did some forward sales, sell another 30% by Nov. 15, 2000, or if the Mpls. Dec. futures price hits $3.90. And if you didn't do any forward sales, sell about two thirds of your wheat crop by Nov. 15 or if Mpls. futures hit $3.90. Sell another 25% by Jan. 24, 2001, or if the Mpls. Dec. price hits $4.50.  Sell the remaining 10% of your 2000 wheat crop by April 25, 2001, or before then if the Mpls. Dec. futures price hits $5.00.

Use the same selling timelines for durum wheat, but use the price goals of $4.75, $4.85, $4.95, $5.05, and $5.10.

Take the loan deficiency payment on wheat at harvest. Expect your local basis (difference between futures prices and local cash price) to improve after harvest, with protein premiums peaking between September and December.

Wheat Strategy • 2000 Crop Evaluate all marketing plans after any major event such as acreage announcement or weather problem. Crop Percent Deadline MGE Dec/Nearby 10 04/19/00 $3.70 25 05/17/00 $3.80 30 11/15/00 $3.90 25 01/24/01 $4.50 10 04/25/01 $5.00

Strategy for 2000 corn crop
Three of the pricing objectives established in Flaskerud's corn selling plan were hit earlier in the growing season: $2.50, $2.60, $2.70. Growers should have used those prices to market about two-thirds of their 2000 corn crop. If you missed those pricing opportunities, take advantage of post-harvest rallies (with 20-cent price increases as trigger points to make sales) to get two-thirds sold. If you're already two-thirds sold, sell another 25% of your corn crop by May 30, 2001, or if Chicago December corn futures hit $2.95. Sell the remaining 10% by June 27, 2001, or if Chicago Dec. futures reach $3.20.

Take the LDP at harvest. Expect basis improvement into next June, just like the previous corn crop marketing year. Consider a hedged-to-arrive contract (sometimes called futures fixed contract) on a 20-cent post-harvest price rally.

Corn Strategy • 2000 Crop Time deadlines for selling need to be revisited near harvest. Inventory Percent Deadline CPT Dec/Nearby 10 05/02/01 $2.50 25 05/09/01 $2.60 30 05/16/01 $2.70 25 05/30/01 $2.95 10 06/27/01 $3.20

Strategy for 2000 soybean crop
Like corn, three of the pricing objectives in Flaskerud's selling plan for the 2000 soybean crop have already been met earlier in the growing season: $5.60, $5.75, and $5.95. "That last price objective actually was within a penny at $5.94, so we'll count it," says Flaskerud.

Thus, you should be about two-thirds sold beans. Take the LDP on those beans at harvest, and put the remaining one-third of the harvested beans under loan and request a "60-day lock" on the posted county price on the beans under loan. The request is made through your local Farm Service Agency office, using the CCC-697 form. The 60-day lock is particularly valuable for beans, since it allows an extended window to take advantage of possible rallies that may arise later if there are problems with the South American bean crop. More information on the PCP 60-day lock option can be found on page 31.

If you're not quite two-thirds sold, you might want to consider putting half of the harvested bean crop under loan, with the PCP 60-day lock. That's because your next significant rally potential would be potential problems with the South American bean crop. January through March is usually when the bean market is most sensitive to South American bean potential, Flaskerud says.

If you're already two-thirds sold, sell another 25% of your harvested bean crop by May 30, 2001, or if the Chicago November bean futures price hits $6.45. Sell your remaining 10% by June 27, 2001, or if Chicago Nov. bean futures hit $6.95.

A number of marketing tools can be used to supplement these trigger-based grain selling plans for wheat, corn, and soybeans, and the best tool to use depends on timing, market conditions, and the producer's individual situation. Consult with a professional marketing advisor for more details on advanced post-harvest marketing strategies to consider.

Be sure to review and adjust your marketing plan for each crop as new marketing information becomes available. Adjust the trigger price objectives if necessary, but don't ignore time deadlines for selling when prices fail to reach stated objectives, Flaskerud urges. Even if price objectives have been set unrealistically high relative to outlook information, the time deadlines make the plan realistic. Since the time deadlines are based on seasonal price patterns, the plan is sound and producers can feel that they have marketed strategically, even when price objectives are not reached.

Soybean Strategy • 2000 Crop Time deadlines for selling need to be revisited near harvest. Inventory Percent Deadline CBT Nov/Nearby 10 05/02/01 $5.60 25 05/09/01 $5.75 30 05/16/01 $5.95 25 05/30/01 $6.45 10 06/27/01 $6.95

Flaskerud may be reached by email at: gflasker@ndsuext.nodak.edu