Grain loaded into truck close up

Everyone has seen the August USDA report. The markets have adjusted. So the question now is simply, “What comes next?”

“All summer we have had a demand bear market,” says Don Roose, president of U.S. Commodities in West Des Moines. “We thought we had a supply bull market. That is no more.”

Since the Aug. 12 report corn prices nose-dived in search of a floor.

“We belly-flopped down till we found better support,” Roose says.

Now he suggests several possible approaches to today’s very difficult market situation.

The first is to keep an eye on the carry. The market right now has a 26 cent difference between December and July corn. That is worth noting, Roose says. It is clear that the market is sending a signal that it doesn’t really want corn right now. Farmers need to factor that carry into their marketing plans.

The second item to keep an eye on is the basis. Futures prices are poor, but there are still going to be poor crops in some areas. That means farmers need to look at the local cash market and the basis, Roose says.

For some, this may mean a close look at the bottom line and at transportation costs as they decide how far it may be worth trucking corn.

The third item to be aware of is insurance. Roose isn’t talking about crop insurance here, although that is an important item. He is talking about taking advantage of market tools to reduce downside risk. There are tools that can be useful here.

And a fourth item to be aware of is the simple fact that the crop is not yet harvested. It is no secret that this year’s planting season was a rough one, meaning many crops are several weeks behind schedule. As a result, there are still some risk factors out there. A late crop means more concern about a possible early frost, for example.

The bottom line is that the USDA and the crop and weather conditions have changed the outlook. Farmers need to look carefully as they adapt to the new marketing situation.

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Gene Lucht is public affairs editor for Iowa Farmer Today, Missouri Farmer Today and Illinois Farmer Today.