Rain makes gain is an old saying in the agricultural world, and there has been plenty of rain across the Cornbelt in the past week or two.
That may mean gain as far as yields are concerned, but it may mean the opposite when it comes to prices, according to Don Roose, president of U.S. Commodities in West Des Moines.
In addition, the market is anticipating the June 30 USDA acreage and stocks reports. Throw in the fact that pollination is coming in July and you have the possibility that prices could be pushed one way or another in the next few weeks. At the very least, Roose says, those items mark times when risk premiums may go down.
It’s simple calendar arithmetic, he says — the further along in the growing season you get without crop losses, the less risk premium the market deems necessary.
“Right now it looks like a huge crop is in the oven,” he says.
With those issues in mind, Roose offers several pieces of advice.
One is to make sure the crop has someplace to go this fall. For some farmers that may mean building storage. For others it may mean buying storage bags. For still others it may mean selling grain for harvest delivery. But with concerns about the ethanol market, it may be important to make sure the bushels have somewhere to go.
Another thing to remember is that prices are below the cost of production for most farmers, and they are also below crop insurance levels. That means farmers should be careful to use market tools that allow them to reduce downside risk and leave the door open for upside flexibility.
There has been one piece of good news lately. Some ethanol plants have gone back on line or increased production, and that has helped basis levels in some areas. That is something to continue to watch, Roose says.