Market Commentary for 3/18/15
Travels to Ohio
Last week I did several presentations in Ohio educating farmers on how they can increase profits with on-farm storage, hedging and using basis/market carry. It was a great opportunity to speak with Ohio farmers one-on-one to learn more about issues they are facing. More than ever it seems farmers are willing to embrace advanced/sophisticated grain marketing strategies as prices remain stagnant.
Right now, many in the trade think farmers will turn to heavy soybean acres, while largely across the biggest corn states (i.e. IA, IL, NE, & MN), this doesn’t make sense. The exceptions may be the more “fringe” states like Ohio. When considering yields and prices, most Ohio farmers would benefit by switching their acres rotation. However, of the Ohio farmers I spoke to, most indicated they plan to keep their rotations relatively close to “normal.”
Throughout the Midwest farmers seem willing to sell soybeans at the $10 CBOT mark (old and new crop). One issue facing U.S. farmers is the U.S. dollar increasing in value compared to other world currencies. This means South American farmers are getting a great price for their beans, despite futures prices decreasing. Some are speculating Brazilian corn will be delivered to the U.S. coast markets this summer. If true, this would indicated prices here could be too high and further price rallies limited.
Corn Prices Remain Steady
Corn still hovers around $3.85. As $4 approaches, farmers let go of old crop until prices dip. Farmer selling is non-existent when the board price drifts to near $3.70. There is no reason to think this trend will change until after 11am on March 31st, the next USDA report.
Some are worrying March has been too dry. Obviously memories of 2012 still runs deep in the minds of many. With frost still in the ground in parts of the Midwest, it’s still too early to worry about drought today. But, soil moisture is important to watch because in 30 days corn planting will start along I-80.
Did you create a marketing plan for 2015? As the busy planting season approaches, many farmers run out of time for their grain marketing planning. Unsure of what to do, many do nothing. It is more important than ever that all farmers understand their break even points and price goals for the year. It makes implementation throughout busier spring/summer months much easier (i.e. more strategy and less emotion). I’m even looking at 2016 sales if prices should rally.
Holding out for the top of the CBOT is unrealistic. No one knows what the growing year will be like or how many acres will be planted. While the 3/31 USDA report provides an estimate of the future, it is a long three months until June when a more accurate estimate is provided.
Most farmers don’t realize that there is significant price risk both higher and lower. While many farmers are hoping for market rallies, most farmers optimistically think the chance for lower prices is small. The truth is, a case can be made for extreme movement in both directions for corn and soybeans.
This isn’t what farmers want to hear. The market seems to be trading near many producers’ break even points. This is why it’s important farmers need to be ready for every opportunity that comes along to squeeze every dollar out of the market they can.
I will be travelling to Cuba during the next two weeks. Therefore, I will have limited to no access to the internet. So, I won’t send my next enewsletter until after the 3/31 USDA report.
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