Marketing Briefs

Three Reasons to Like Pre-Harvest Pricing

1. The tendency for new crop prices to decline between spring and harvest. For example, a decline of some size has occurred in 17 of the 25 years since 1980 (68%). This includes last year’s decline of over $1.00 per bushel from spring to fall – the largest decline ever.  As well, in 15 of the 25 years since 1980 (60%), November bean futures were lower harvest than they were in the spring.
2. The opportunity to achieve a higher price in a lower market by combining a forward price with a higher LDP.
3. If you know your cost of production, you’re in a better position to define a profitable new crop sale.

So says Ed Usset, grain marketing specialist for the Center for Farm Financial Management at the University of Minnesota. Read his “Three Reasons” more in-depth online at www.cffm.umn.edu/Pubs/ThreeReasons.pdf.  His pre-harvest sales recommendations for 2005 can be reviewed at www.cffm.umn.edu/publications/mktplans.aspx . Ask a marketing question at www.cffm.umn.edu/publications/edsworld.aspx .

Gulke: Why Criticize Producers for Expanding?
“Producers are often criticized for expanding their operation (land acquisitions and capital equipment) that results from well intended farm program policies. However, simple economics dictates that businesses expand those areas (profit centers) that were instrumental in the overall success of the enterprise. Such action is acceptable for non-ag businesses, yet unacceptable for agricultural producers? We tend to go home with the one that brought us to the dance! So one can hardly blame producers for capitalizing profits back into the core business, as that is their business.” – Jerry Gulke, in his grain marketing presentation at the 2005 USDA Ag Outlook Forum (www.usda.gov/oce/forum/speeches/Gulke.pdf ).

2005 U.S. Wheat Acreage Expected To Decline
USDA’s initial prospective plantings report estimates that U.S. farmers will plant 58.6 million acres of wheat in 2005, which would be down 2% from last year and the lowest planted acreage since 1972. Winter wheat planted area is estimated at 41.6 million acres, down 4 percent from 2004, while spring wheat planted acreage is estimated at 14.4 million acres, up 4% from last year. Spring planting conditions will be a key factor in determining actual spring wheat acreage. USDA’s revised prospective plantings report will be issued June 30, including biotech crop planting estimates.