Use These Charts to Estimate Expected Net Price, Plan Sales

By Tracy Sayler

You can estimate expected net prices for wheat, corn, soybeans and canola for any given months in the future, thus helping to plan grain sales, using 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.

The Nearby Futures Month and the Nearby Futures price for each corresponding calendar month are entered in the next two columns.  In the Nearby Futures column, the settle price is entered using the closest futures month (Nearby 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 $3.21. Most daily newspapers publish the grain futures prices you would need to do your own sales planning charts.

In the fourth 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 34 under. 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 $3.21 plus the Nearby Basis of -34 equals an Expected Price of $2.87.

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. No LDP is used for August in the wheat chart. Where the LDP Values are listed, the values increase 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 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 October, 2001, add the Nearby Futures price – which on July 21, 2001 was $4.86, using Chicago November soybean futures—with last year’s soybean basis for Hunter in March (Nearby Basis ) -57, which gives an Expected Price of $4.29. Adding an LDP Value of 66 cents and no Storage Cost with harvest sales, the Expected Net Price is $4.95/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.

Planning Sales of Canola in 2001-2002 (U.S. Cent/CWT) Calendar Month Nearby Future Month Nearby WCE Futures Velva Nearby Basis Velva Expected Price Storage Costs Expected Net Price         (+) (-) (=) Aug Sep 1019 -61 958   958 Sep Nov 1016 -63 953 29 924 Oct Nov 1016 -78 938 36 902 Nov Jan 1013 -64 949 43 906 Dec Jan 1013 -58 955 50 905 Jan Mar 1006 -43 963 58 905 Feb Mar 1006 -51 955 65 890 Mar May 1001 -42 959 72 887 Apr May 1001 -41 960 79 881 May Jul 1013 -49 964 86 877 Jun Jul 1013 -25 988 94 894