The corn and soybean markets continue to be strong.
The acreage battle continues to be at the forefront of everyone’s mind. It will be a wild ride until the end of March when the U.S. Department of Agriculture will announce the prospective plantings report. It seems that the big question is how far from 90 million acres of corn and 69 million acres of soybeans will the 2008 planting intentions be?
The price discovery period for Crop Revenue Coverage and Revenue Assurance has begun. Feb. 1 was the first day and it will conclude Feb. 29. The close of November soybeans and December corn will be recorded each trading day in February.
A simple average is taken and that is the spring price and establishes the minimum revenue guarantee for each insurance plan. The revenue guarantees are going to be higher than we have ever seen which means careful consideration needs to be made with each policy.
The CRC plan has a $1.50 cap on the movement of corn and $3 on soybeans up or down. There are some twists to the CRC and RA policies by adding coverage for hail and corn for ethanol production. The stakes are high and the pros and cons of each policy must be understood.
Since the USDA report in January the corn market has been jittery. March corn is about 10 cents off the recent high. July corn is about eight cents of the recent high of $5.30. The corn futures prices continue to hang at high levels but there is no shortage of scenarios that could push the market much lower or higher. No one is willing to take a guess as to which way we will move next. The market continues to be resilient.
The soybean market is also strong. March soybeans are just 13 cents of their recent highs. May through August soybeans futures are trading over $13. New crop soybean futures continue to hang close to $12.50.
The acreage battle with soybeans seems to be around double cropping soybeans with wheat. Wheat prices have been exceptional which should make producers rethink wheat seeding this spring. The cost to produce an acre of any crop has shot straight up but wheat and soybeans do not require as much capital as corn so many believe producers may make the switch away from corn. Cropping plans have been made so there will be little switching between now and the end of March.
This is that time of year to evaluate your marketing plan. If you are heavily sold ahead you will need to evaluate an RA or CRC policy. If we would have a short crop you would have to buy bushels at a much higher price to fill contracts. The CRC cap will be an issue.
There are still many questions about 2009 and 2010 crop sales. Until we know, further selling in small increments seems to be the conservative thing to do. If the market, for whatever reason, would begin to break hard then larger blocks of grain should be sold.
Not to complicate things any further one eye needs to be kept on the outside markets. What is the overall world economy like? Most would agree that ethanol got us to this point, what changes could be made in the industry to really send shockwaves through the grain market?
Grain Angles is written by Dennis Kelly of LeCenter, Minn.