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 27 under. Your local elevator would know numbersfor your area. 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 $3.82 plus the Nearby Basis of -27 equals an Expected Price of $3.85.

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. If the LDP Values are triggered, 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, 2002, add the Nearby Futures price – which on July 24, 2002 was $5.44, using Chicago November soybean futures—with last year’s soybean basis for Hunter in March (Nearby Basis ) -65, which gives an Expected Price of $4.79. With no LDP Value and no Storage Cost with harvest sales, the Expected Net Price is $4.79/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 Wheat 14% Protein Sales at Hunter Calendar Month Nearby Futures Mo. Nerby Futures 7/24/02 Nearby Basis Expected Price (+) LDP Value (+) Storage Costs (-) Expected Net Price(=) Aug Sep 382 -27 355 0   355 Sep Dec 385 -35 350 0 10.2 340 Oct Dec 385 -29 356 0 11.3 345 Nov Dec 385 -19 366 0 12.5 353 Dec Mar 383 -18 366 0 13.7 352 Jan Mar 383 -17 366 0 14.9 351 Feb Mar 383 -22 361 0 16.1 345 Mar May 376 -16 360 0 17.3 342 Apr May 376 -17 360 0 18.5 341 May Jul 372 -10 362 0 19.7 342 Jun Jul 372 -9 364 0 20.9 343 In/Out Cg = 9 Bank Int = 8.00% Per Mth = 0.67% Loan = 296     CCC Int = 3.38% Per Mth = 0.28% LDP = 0     Shrink = 0.60% Per Mth = 0.05% Basis = Historical

November Good for Barley Sales

This chart, which tracks annual feed and malting barley price patterns out of Minot, ND since 1994, indicates that modest seasonal strength in barley prices can usually be expected following harvest.  The vertical lines in the chart indicate November months. Short-term storage may be worthwhile for some barley growers, since there might be a greater possibility of making malting and less stringent quality discounts in months following harvest.

Flat Protein Premium Expected

A weather-stressed, higher protein hard red winter wheat crop this year will likely result in a wheat market with flat protein premiums.  Protein premiums typically peak in the fall.  However, stocks are tight for hard red spring wheat, which translates into a better price (25-30 cents as of mid July) for HRS at Minneapolis compared to Chicago.

Consider Harvest Sunflower Sales

A tight supply of sunflower—and in fact, tight supplies of vegetable oils worldwide— looks to be supportive of sunflower prices into spring. Still, whether prices next spring will justify storage until then remains to be seen, especially when prices are attractive now. NDSU extension crops economist George Flaskerud advises sunflower producers to consider making the bulk of their sunflower sales around harvest, and replace cash sales with soy oil options if you want to speculate on prices moving higher later. You may also want to consider spreading out your sales: Sell a portion of your sunflower crop off the combine; some around January 1; and the balance next May, when the seasonal price typically peaks.

Canola Likely to Follow Price of Other Oilseeds

NDSU extension crops economist George Flaskerud notes that canola producers can often get a contract for December or January delivery at a price that is more attractive than selling off the combine.  Canola may follow the price of other oilseeds at harvest. If prices are attractive, consider at least some harvest sales, or explore out-month contracts for later delivery if the price justifies storage.

Comprehensive information on marketing strategies for canola can be found in Extension Bulletin EB-74, “Price Risk Management for Canola Producers in the Northern Plains,” available online at www.ext.nodak. edu/extpubs/agecon/er/eb-75-a.htm or through NDSU extension county offices.