It is Father’s Day as I sit down to write this blog, and I was lucky enough to be able to worship with my Dad this morning and take him out for lunch. I believe that because farm Fathers and their children generally work together, they build a very special relationship.
One thing I did not learn from my Dad was how to forward market grain. We had a diversified farm and either cut our corn for silage or fed it to cattle. He will soon be 89 years old, and rents his ground to a grandson on shares. He still has a difficult time selling grain before it’s in the bin, which limits him to about a 7 to 9-month “marketing window”. This is what I want to talk about today.
As I think about the 2015 crop, which will be harvested in October and November, if none of this crop has been sold, all decisions will need to be made on information and circumstances we do not yet even know. Producers with nothing sold are now looking at a 12-month marketing window (approx. 4 months prior to harvest and eight months following harvest). Depending on their storage capacities and their risk-bearing capacity, maybe this plan works for them.
A producer willing to sell ahead and open his “marketing window” up to say two years takes a lot of pressure off each and every sale. A two-year window would have producers looking for opportunities right now for their 2016 crop. The best opportunity for the 2015 crop for a producer looking this far out would have been $4.40 Dec 15 futures achieved in late December 2014. Will the next 12 months again provide this opportunity? I don’t know, but wouldn’t having at least a portion of the crop sold feel good and take some pressure off of “hoping” we get back there?
$4.40 Dec futures would have resulted in $4.00 cash sales right out of the field for those without storage, or could be rolled and depending on your local basis environment, resulted in $4.25 cash sales in early 2016 or $4.40 cash summer 2016 sales.
We have now been in a three-year cycle of the best opportunities presenting themselves the further out you are willing to look. Again for this year’s crop, a 2 ½ year “window” would have provided opportunities slightly above $5.00 futures achieved in April/May 2014 and a 3 year “marketing window” would have provided for nearly $5.25 futures the end of Aug 2013.
I strongly believe that if 2016 sales have not already been made, it is time to get orders in and sell at least a small percentage of that crop, and hey, 2017 is not that far away. I hope two years from now I am again sitting in church with Dad and buying him lunch afterwards.