Selling Your 2001 Crop:

A Realistic Goal is Simply to Get a Better Average Price

When setting your price benchmarks for the 2001 crop, it’s more realistic to seek a better average price, rather than gunning for the top of the market.  Marketing strategies that increase overall net price by even a dime per bushel could boost net income substantially, says Ed Usset, University of Minnesota extension grain marketing specialist.

Usset says a marketing plan can help you get a better average price. It should take into consideration your financial goals, cash flow needs, price objectives, decision dates, storage capabilities, crop insurance coverage, anticipated production, and appetite for risk.

You should have begun drafting your marketing plan for the 2001 crop well before it was planted. Although you should already have a pre-harvest marketing plan in place, it’s still not too late to establish post-harvest plans.  The same time that you begin planning your cash flow needs for the 2002 crop year may be a good time to also draft your 2002 pre-harvest marketing plan.

Following are post-harvest marketing plans to consider for corn, soybeans, and spring wheat.

Sample 2001 Post-Harvest Spring Wheat Marketing Plan
Objective: Seek strategies that offer a price higher than the loan rate. Hold no unpriced wheat beyond July 1, 2002.

• Collect any LDP at harvest on all bushels.

• Deliver 20% of crop to satisfy forward contracting commitments and to meet current cash flow needs.

• Place 40% of crop into on-farm storage and sell the carry in the market using some form of forward contract/futures hedge/futures fixed contract.

• Place 20% into on-farm storage and sell the carry in the market using put options/a “fence” (buy puts, sell calls for example)/minimum price contract (to hang on to the upside potential) or take out the loan and sell before July 1.

• Place remaining bushels into on-farm storage, with strategy to be implemented later but with wheat priced by July 1, 2002.

Sample 2001 Post-Harvest Soybean Marketing Plan
Objective: Seek strategies that offer a price higher than the loan rate. Hold no unpriced soybeans beyond Aug. 1, 2002.

• Collect LDP at harvest on all bushels.

• Deliver 10% of crop to meet current cash flow needs.

• Place 30% into on-farm storage and sell the carry in the market using some form of forward contract/futures hedge/futures fixed contract.

• Place 20% into on-farm storage and sell the carry in the market using put options/fence/minimum price contract, or take out the loan and sell before Aug. 1.

• Place the remaining bushels into on-farm storage, with strategy to be implemented but with soybeans priced by Aug. 1, 2002.

Sample 2001 Post-Harvest Corn Marketing Plan
Objective: Seek strategies that offer a price higher than the loan rate.  Hold no unpriced corn beyond July 1, 2002.

• Collect any LDP at harvest on all bushels.

• Deliver 30% of crop to satisfy forward contracting commitments and to meet current cash flow needs.

• Place 33% into on-farm storage and sell the carry in the market using some form of forward contract/futures hedge/futures fixed contract.

• Place 16% into on-farm storage and sell the carry in the market using put options/fence/minimum price contract, or take out the loan and sell before July 1, 2002.

• Place the remaining bushels into on-farm storage, with strategy to be implemented but with corn priced by July 1, 2002.

More Information
See Usset’s website: The Minnesota Grain Marketing Page, at http://www.apec.umn.edu/faculty/eusset/.  It includes more information on available strategies, and how you can make changes to your marketing plan. Usset can be reached by email at usset001@tc.umn.edu.

Seasonal Price Patterns
For both soybean and corn prices since 1980, new crop futures prices have traded lower from May 1 to October 1 in 15 of the 21 years (71%) observed. In only 6 of these years (29%) did the futures markets improve. Among these years of price improvement were the drought years of 1983 and 1988. For soybeans and corn, the average decline from May 1 to October 1 was 36 and 19 cents per bushel respectively. Bear in mind that this was the average for all years, including the years where prices traded higher from planting to harvest. For spring wheat, the same general trend in prices held true, but not quite as often and not as pronounced. In 14 of the 21 years (67%) the market declined - the average decline was a more modest 13 cents per bushel.