We have not even reached the middle of November, and harvest, for the most part, is already wrapped up. As I drive around, it is getting harder and harder to find an unharvested cornfield. Some of this crop that has been put away has been sold for future delivery to an identified market. Additional bushels have been hedged, and decisions still need to be made on when and where to deliver.
It is the balance of this crop or the “unsold” bushels that I want to talk about in this week’s blog. Do you have a “plan” for these bushels? If this grain is stored on the farm, when do I want to move it? Who do I want to deliver it to? Have I determined a price that I want for my grain? Is that price reasonable? When will I need to generate operating capital? Are there ways I can add a “bonus” to the price I receive. Am I familiar with all the tools available to help maximize my price, and assist in the logistics of moving my grain? These and many other questions need to be addressed in your marketing plan.
The price you receive for your grain is established in two separate, but related markets; the futures market and the cash market. The term basis refers to the price difference between the local cash price and the futures price. Commodity futures are impacted by many national and international factors including global weather and crop conditions, investor/speculator effect, domestic and international economics, geopolitical issues and much more. The basis is controlled by local movement of grain.
Many times, the futures market and basis are not in the best interest of the producer at the same time. Generally when futures are declining, basis needs to strengthen to keep grain moving into the “pipeline”. This can present an excellent opportunity to establish this part of the cash price equation. Typically when future markets are moving higher, basis weakens as producers are more willing to “let go” of some bushels. Again, an opportunity to establish this part of the cash price equation. A lot of times, cash flow requirements dictate when grain sales “have” to be made, even if the market environment is telling us to wait.
At CVA, we have solutions or “tools” available to address all of these scenarios, and would be happy to sit down with you, and talk about your plan. Please contact your local CVA location and ask to be connected with a ProEdge Grain Specialist or Risk Management Consultant to discuss the many solutions available to you, the producer, to help maximize the value you receive for your grain.
Another great way to diversify your grain marketing plan is to assign a portion of your unsold “old” crop grain to CVA’s Grain Advisor Program. These bushels will be marketed by an independent third party over a specified pricing period. Bushels on the Grain Advisor Program will be sold pursuant to CVA’s HTA contracts at maturity, giving you flexibility on destination and delivery time period. This program is also available for 2016 “new” crop. The deadline to enroll in this program is December 15, 2015.