Corn and Soybean Farmers Must Act Now

Teresa Olson
By Teresa Olson February 27, 2018 08:50

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Steve Johnson, farm and ag business management specialist with Iowa State University recently tried to get attendees at an annual ag outlook meeting to create grain marketing plans.  Only about half actually have any sort of plan and Johnson states that the strategies, tools, and marketing planning available need to be used.  He told the crowd that their ego was their biggest limitation, and went on to list 14 things corn and soybean producers need to do in the next few weeks:

  • Sell the rallies.  With more grain in storage than any time in the past 30 years, it’s time to get it out of the bins.  Corn has a shelf life of 10 months, so don’t hang on to it for years.
  • Lower your expectations.  2018’s cash price for corn is predicted to be $3.30 according to the World Agriculture Supply and Demand Estimate.  Don’t expect it to reach $4.00.
  • Grab the basis in April or May.  Take the opportunity now as it will probably come apart by July.  This is not a year to bet on the weather.  Try to make some profit or at least try not to lose money.
  • Focus on the right risk.  Don’t try to outguess the markets, weather forecasts or USDA reports.  The risk of future price and the risk of basis should be your focal point along with cash-flow risk, and February is when the basis widens because many farmers need cash, this year more so than in recent years.
  • Assume beans will boom this year.  Johnson believes farmers in Texas, Oklahoma, and southwest Kansas will rotate out of traditional corn and plant soybeans.  That means more beans when we already have way too many.  He expects stocks next winter will be at levels he can’t remember.
  • Cut off the co-op.  Johnson feels they’ll have another record year and farmers contribute to that.  He feels we have too many bushels for the amount of demand with five large crops in a row.
  • Skip the delayed price (DP) contract.  If your co-op is offering a DP it’s saying it needs your corn. Johnson wants to price most of his corn in April, May, and June.
  • Quit hoarding corn.  If you have stored corn from past years you’ve probably lost money and you would have been better off selling off the combine.
  • Let your wife make the call.  Johnson feels wives will do a better job of managing because they don’t have greed and ego standing in their way.  Instead of trying to sell at the highest price, they’ll generate cash flow for the farm.
  • Take emotion out of the equation.  Johnson asserts that by March 1st, you need a plan with a price and time objective written down.  Try to sell enough in this late winter and spring rally to make your cash flow work next fall and winter.
  • Know your cost of production.  There should be no excuse for not knowing, but only about 40% of farms in Iowa do.  Johnson says if you know your breakeven to grow corn is $3.47, you know when to market.
  • Get your crop insurance.  The government right now is paying nearly two thirds of the premium, so use it.  Johnson believes premiums will be slightly lower in 2018, and so advises growers to take those dollars saved and put them into hail coverage which isn’t subsidized.
  • Expect good growing conditions.  With the fading of La Niña, Johnson expects another neutral summer like last year.  However, a mild El Niño predicted for late summer could mean record soybeans.  A cooler, wetter August could mean $8 beans off the combine.

This is a quick overview of what Steve Johnson had to say, so click on the link below for more details.  Time is ticking!

-Terry Olson, Titan Outlet Store Team

Resources:

https://www.agriculture.com/news/crops/14-things-every-corn-farmer-must-do-in-2018?utm_source=ag-newsletter&utm_medium=email&utm_campaign=todaysnews_021918&did=220648

https://www.extension.iastate.edu/agdm/crops/html/a2-40.html

 

Teresa Olson
By Teresa Olson February 27, 2018 08:50
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