Price Picture Suggests Wheat, Soy Harvest Sales

Grain market fundamentals have turned more bullish than in the past few years. Wheat stocks continue to decline, but are still above the short supply that led to explosive prices in 1995-96. Storing wheat does not appear to be profitable, according to NDSU extension crops economist George Flaskerud.   Consider selling up to two-thirds of your wheat crop off the combine, and/or placing it under loan and selling in November when the seasonal wheat price often rallies.  If you are concerned about missing price rallies in 2003, then consider replacing cash sales with a call option (near or at-the-money) or sell a minimum price contract, which locks in a minimum cash price.  That way, you can still take advantage of upside opportunities, without storage costs.

The market situation for soybeans appears similar. U.S. soybean stocks are tight, and the current market trend suggests that storage does not look profitable.  Consider selling the majority of soybeans for harvest delivery, offsetting cash sales with call options or minimum price contracts.

Current market conditions suggest that the corn basis will improve into next spring, and thus corn may offer a better return on storage than wheat or soybeans. 

This point is illustrated by comparing the nearby futures price to board prices next spring.  At the end of July, 2002, only corn offered a carry (price difference between futures prices in different delivery months) that would make storage worthwhile into spring, 2003. Before harvest, consider selling corn for delivery in July, 2003 using a hedge-to-arrive (futures fixed) contract.  Or, after harvest, consider placing corn under loan and make sales on rallies using HTA contracts.

Loan deficiency payments appear unlikely for any crop this year. When there are LDPs, the best time to take them is at harvest, according to an analysis of LDP trends by NDSU, which can be found in a summary on the Internet at www.smallgrains.org/springwh/MGuide01/ldp/ldp.htm.