Farmers are seeing good commodity prices this winter and a market that is telling them to sell now rather than storing their crop, but high input prices for next year’s crop are complicating the decision whether to sell.
“We have a lot of balls in the air,” says Don Roose, president of U.S. Commodities in West Des Moines.
Roose says corn prices are good but not as good as they are in some other parts of the world. U.S. cash corn has been in the $5.70 to $5.90 range. In Brazil it has been more like $7. In China it is over $10. But the market is also telling farmers not to store grain. The price difference between December corn and July corn is only 2 cents.
There is more of a carry in the soybean market, but the fact that the market clearly wants farmers to sell now is important when looking at a marketing plan.
The challenge for many farmers is that while cash prices are good, they are also looking at fertilizer and other input costs for next spring that are sky high. For some producers, that is reason enough to hold back in hopes the corn market will eventually rise to match the input costs.
That may be a situation where farmers could use market tools to do some risk management.
The good news is that demand is good. The ethanol market is doing well. The soybean crush is high. There is a demand for corn and beans worldwide.
This scenario may mean that even more attention is put on South American crop conditions in the coming months. It definitely means farmers will be watching the futures market for any clue about whether commodity prices will go up in correlation with input costs.
Roose says one key is for farmers not to get “deer in the headlights syndrome” where they don’t do anything. Monitor the market. Make a plan. Do some risk management.