Published: February 27, 2008 05:45 pm            

Grain Angles: Unheard-of selling opportunities now

Originally published in the February 22, 2008, print edition.

There is nothing easy about the corn and soybean markets.

Traditional signals in the market are not holding true. Fundamentals that are tried and true give false signals. The grain market continues to be a big money game more than anything at this point. There is something to be said for bidding for acres but we are above and beyond that line of thinking.

Corn futures are up 14 to 19 cents in the last two weeks. The corn charts have flashed reversals down but then come right back. March corn is trading at $5.14 and July corn at $5.38. New crop December corn is also trading at $5.38.

If you have corn to sell, the opportunities are unheard of right now. The local basis levels are ranging in the 40- to 50-cent area. Basis levels are going to vary greatly depending on who needs corn. It is important to be aware of what the basis bids are because they are no longer normal either.

The soybean market will not be out done by corn as the market has put on about 90 cents in the last two weeks also.

March soybeans are trading at $13.73 with July soybeans at $14.02. New crop soybeans are trading at $13.17. Soybean basis levels are wide compared to what we are used to.

I have many calls about the basis and many are about to forget the basis and sell some soybeans. We are at all-time highs and it is hard to let $12-plus soybeans go unpriced. Many soybeans have been sold at lower levels which is not a good feeling but the new crop is ahead of us.

I have had several calls about marketing plans. It is important to cover the cost of production on this year’s crop. Most all costs are known and fixed so it is time to cover them. The remaining crop needs to be sold in small increments, down to a truck load at a time.

When soybeans move 90 cents in two weeks it does not make sense to make large sales. When corn is up 15 to 20 cents in a two-week period the same thought applies. If the corn and soybean markets do decide to correct it will come with little notice and it will be swift. If the correction bothers you, then be prepared to sell on the way down also.

Remember the correction will start at all-time highs so there will be plenty of room to sell on the way down. There are large numbers of sales that have been made for 2009 and 2010. It is especially important to be conservative with those sales because we do not know the cost of production that far out. We all know what has happened to the cost of production.

The marketing tools that we are used to using are becoming unavailable. Capital requirements by grain buyers are becoming an issue and tools are not being offered because buyers cannot get capital to support market positions. I continue to hear that producers are going to have to establish hedge accounts and margin their own accounts. It will be important to think long and hard about establishing hedge accounts and have the funds to margin them also. Historically producers have not been willing to write a lot of checks for margin money even though the risk is there with grain in the bin.

It will be important to have a plan in place before fieldwork starts this spring. Most likely the market will continue to be volatile the rest of the year.

        

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