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

2000 post-harvest marketing strategies

By Sheldon Laib

Wheat
By the time you are reading this article many of you will have completed wheat harvest and hopefully locked it away in the bin. If you did this, you have already taken one step in the right direction.  The next step to this process should be taking LDP on the grain and forward pricing or writing a futures fixed contract (also referred to as hedged-to-arrive) off of the March contract on a strong up day. (We would write these contracts on 50% of production).  The market is paying you to store it until then, as March futures are 30 cents higher than the September futures.  This more than pays for your storage cost.

The way we have recommended forward pricing is by fixing the futures on the March contract.  This will leave the basis open and gives us a chance for basis and protein scales to improve. The other nice thing about using the March contract is that it gives us the option of taking the income in this year or next year.   This does limit our rally potential, but if we just take the LDP our risk to the downside is left open.

The other thing that we are extremely concerned about is losing the carry in the market and feel it is important to lock this in if we are going to store grain.   If you have not done anything with your wheat at this point, you should contact a grain marketing consultant to see if this will still work.   

Corn
Our corn marketing strategy is a lot like the wheat. Once again we like storing the grain and locking the huge carry in the market in at harvest time. We will not do anything with corn marketing between now and harvest if the market does not rally. Our main reason for doing this is because basis levels are extremely weak and we are well below loan rates. 

Many of you are probably saying that "yes this is true, but look what I could gain if December corn futures go to $1.60."  But I must ask you if it is worth the risk at this point. We personally do not feel it is at this time looking at historical price levels.  So, what we are looking at doing with corn is waiting until harvest and then taking the LDP on a strong up day.  That same day we will go to the elevator and write a futures fixed contract on the March contract or more distant month. Before doing this you will have to look at the carry in the market to see if it pays to go out farther.

After we do this we look for basis levels to improve and move the grain. The big negative with this is that we have to store the grain and many of you might not be able to store both of these commodities.  If you do not have enough storage for both of these commodities, we would rather see you store wheat than corn to capture the bigger carry in the wheat market.

Soybeans
This is one of the first things we would look to sell off of the combine.  Soybeans are expensive to store and the market does not pay us to store them.  What we currently recommend to our clients is writing basis contracts. (This was being done end of July- early August).

We feel that basis levels will only get weaker as we get into harvest and this may allow us to add 5 to 15 cents per bushel. At harvest, we will wait for a strong up day and then LDP the soybeans and lock the futures in on our contracts. If we want to maintain ownership we will go out and buy call options or futures in deferred future contracts. 

Minor Oilseeds
If storage is a problem or you need to create cash, these are one of the first things we would sell.  The main reason is because of how far below loan rates we actually are. If we sell the crop and take the LDP, it should take us back to loan rate—and that is what we were looking at when we planted the crop. 

If you do have storage, we would look at storing flax and contracting it for October delivery, as there is enough premium to more than pay for storage right now. As far as canola and sunflower, we would look at taking the LDP off the combine and moving the cash grain. If you want to maintain ownership, look to replace them with futures or options in the bean oil market.

These recommendations are based on the assumption that you have to sell something off of the combine,  either to generate cash or because you do not have enough storage for all of your grain. Bear in mind that every producer's situation is different, and you should consult a grain marketing consultant to help you decide what is best for you.  If you have any questions, feel free to give Doug, Gary, Jerome, or myself a call at 1-800-285-4669. ..

Laib is with Futech Commodity Services, Inc., Moorhead, MN, email: futech@futechcommodities.com. Website: www.futechcommodities. com. Last year's Prairie Grains Marketing Guide that included a listing of marketing advisors in the region may be found online: www.small grains.org/springwh/MGuide99/Pro/pro.htm. The opinions expressed herein, and basis from which they are drawn, are believed to be reliable but because of their complexities and their reference to the future, cannot be guaranteed.  Neither the information, nor any opinion herein, constitutes a solicitation of the purchase of any commodities. Futures trading involves risk.