The corn, soybean and wheat markets continue to be strong.
The demand for our grain is strong and continues to show no weakness. There are numerous reasons for strength; it is almost as if it can never come down. We have had 16 months of strong prices, a long run in marketing terms.
Old crop corn futures are 21 cents higher in the last two weeks. March corn is trading around $4.37 with July corn at $4.56. New crop December corn futures are at $4.54. It is hard to imagine that $5 corn is in sight.
It is easy to get bulled up over the market and lose sight of what needs to be done. A disciplined marketing plan is essential in times like these. Another essential project is an enterprise analysis of all costs. It is no secret that costs have skyrocketed and it is shocking to see what costs have done.
Many crop budgets that I have seen take 130 to 140 bushels of corn per acre to break-even at $4 cash corn. The unnerving part of the scenario is if corn drops back to $3, which by historical standards is still good, but pushes break-evens to 170 to 200 bushels per acre.
Soybean prices continue to move much higher. The talk of increased usage of biodiesel is supportive. Soybean meal as a protein source for human and animal consumption is increasing rapidly around the world.
There is some uncertainty about the South American soybean crop because of dry weather conditions. Old crop soybean futures are up as much as 52 cents in the last two weeks. January soybeans are trading around $11.60 with July soybeans trading at $12.01.
Another disciplined marketing plan needs to be established for soybeans. A close evaluation of costs needs to be done for soybeans. It appears that soybean break-evens will take 40 bushels at $10. New crop cash soybean bids are flirting with $10 currently in southern Minnesota. A price break back to $8 soybeans would push the break-even up to 45 to 50 bushels per acre.
I get numerous questions everyday in regards to what to do. It is important to have a plan that will cover the cost of production. This is easier said than done but a plan needs to be in place to do this.
It will take many marketing tools to get it done. There is not one tool that is perfect; they all have risks and rewards, but it is important to have a plan to protect from a sudden and unforeseen correction in the market.
Never have we had a cost structure like we have today and the news is bullish. What surprises will be held in the January U.S. Department of Agriculture crop report? The cost of production is no longer variable; it is fixed because most inputs have been bought. Who would have thought it could be this complicated at $4 corn and $10 to $11 soybeans.
Grain Angles is written by Dennis Kelly of LeCenter, Minn.