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Plan Grain Sales, Estimate Expected Net Price 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 sales and estimate the profitability of storing grain, using the tables on pages 49 as a guide. Created by NDSU extension crops economist George Flaskerud, 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 thus would like to estimate the net price you might 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 $3.53. 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, N.D. is 36 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. (See more basis information, including links to online basis charts, on pages 52). The Nearby Futures number is added with the Nearby Basis number to calculate an Expected Price in the fifth column. Thus, for August in the wheat example, the Nearby Futures price of $3.53 plus the Nearby Basis of -36 equals an Expected Price of $3.17. 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, estimates provided on page 50, 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. The tables do not include an estimate for LDP. After you’ve calculated the Expected Price for the Calendar Month in each row of the chart, an LDP amount could be added to the expected net price, if you indeed take the LDP on that grain. Here’s an example from start to finish, estimating net price for soybeans selling off the combine, using the soybean sales planning chart: To figure the Expected Net Price for soybeans in the Hunter, N.D. area for the Calendar Month October, enter the Nearby CBT Futures price, which on July 11 was $7.02. Subtracting the nearby Basis of -63, and with no Storage Costs, the Expected Net Price is $6.39. 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. The tables on the below can help producers plan grain sales and estimate an expected net sales price. These chart numbers indicate that as of mid-July, the most promising sales opportunities for wheat would appear to be in the Nov-Dec timeframe. After that, storage costs appear to offset advantages of storing into next spring. The timing when these charts were calculated in July indicated that sales opportunities for corn would be best next spring. You could store unhedged or use a storage hedge such as hedge-to-arrive in July ’05 futures with June delivery. The soybean chart indicates given current market conditions, remaining sales should be considered before January, before South American soybean supplies start to roll into the pipeline. Bear in mind that the marketing signals pointed out in these charts will change as nearby futures and basis will change. Wheat Sales in Nov/Dec, Watch Exports, Canada & Australia (Consider loan for farm-stored, low-protein wheat. Continuously evaluate local elevator net price versus loan net price. April looks promising for low pro sales)
Corn Storage Hedge Looks Profitable Using Futures or HTA Contract (Consider using storage hedge once price objectives have been achieved)
Calendar Month Nearby Futures Month Nearby CBT Futures Hunter Nearby Basis Hunter Expected Price Storage Costs Expected Net Price Oct Dec 2.47 -52 1.95 -- 1.95 Nov Dec 2.47 -48 1.99 9.9 1.89 Dec Mar 2.54 -43 2.11 11.3 1.99 Jan Mar 2.54 -50 2.04 12.7 1.91 Feb Mar 2.54 -48 2.06 14.1 1.92 Mar May 2.57 -50 2.07 15.5 1.92 Apr May 2.57 -43 2.14 17.0 1.97 May Jul 2.60 -40 2.20 18.4 2.01 Jun Jul 2.60 -36 2.24 19.9 2.04 Consider Selling Soybeans Off the Combine
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