Farmers face an interesting choice at the moment. They can lock in some very good prices for both new crop grain and for next year’s crop. But inflation and dramatically increased input costs for next spring have some of them concerned they may want to reach higher for any future sales.
“That is really the big picture people are watching,” says Don Roose, president of U.S. Commodities in West Des Moines.
At the moment, the market is being pushed by outside forces and by investor moves, Roose says. Worldwide inflation has investors moving toward commodities, which is enough to overcome the stronger dollar and other market factors.
In the short term, Argentina and Brazil appear to be getting adequate rain, so the growing outlook for those countries is good. The U.S. crop was a good one this fall. Normally, those items would push grain prices lower.
But ethanol margins are also near record levels, and that industry is doing well at the moment. And crush margins are at historic highs.
In other words, people are making money in the market right now. And farmers are making money. But they are showing some concern for what happens this winter and next spring.
With those trends in mind, Roose says this may be a year when flexibility in a marketing plan is a good thing. Tools such as window contracts or contracts which allow farmers to have some flexibility to address higher input costs or changes that may come in those input costs could be useful.
For some farmers, the best approach may be to lock in prices right now, especially if they can pencil out a profit even with higher input costs. For others, there may just be too much uncertainty. That’s where the flexible approach may be useful.
Either way, there will be plenty to watch this winter.