It’s no secret prices aren’t where farmers want them to be. However, with the 2018 harvest in the rearview mirror, attention has turned to making sure they can lock in a profit.
“We don’t care what time of the year it is,” said Decorah, Iowa, farmer Bob Hemesath. “As long as we can lock in something that we feel is one of our benchmarks or meets our marketing plan — as far as our ability to either lock in a profit or lock in something about break-even.”
As of Jan. 24, the price of corn is slightly above where it was a year ago, up just over 6 percent, while the price of soybeans has seen a 7.76 percent drop, from bordering the $10 mark to hovering in the lower $9 range.
Some of the pain in soybeans can be attributed to the ongoing trade war between the U.S. and China, but Midwest Marketing Management’s Pat McLaughlin said that even without the trade war, the farm economy might still be seeing a downturn.
“Chinese demand is down overall anyway,” said McLaughlin, a Union, Iowa, based commodity broker. “At the end of the day, we have too many soybeans. We have huge ending stocks in soybeans, and if China comes and takes what the trade is talking about, we are still going to have too many soybeans.”
With a huge supply available in U.S. bins, McLaughlin said he wouldn’t be overly eager to sell quite yet.
“I wouldn’t want to be sold out here,” McLaughlin said. “The U.S. growing season is always the king, and we had a fair amount of corn forward-contracted last year. A lot of soybeans were forward-contracted and sold, so with what I have left, I’m not in a big hurry to get rid of it all.
“As dismal as it looks right now, the U.S. growing season can turn things around quickly.”
McLaughlin noted farmers will need to lock in profits when the opportunity arises. If the November soybean contract hits the $9.75 or $9.80 area, “you probably better be taking a look at that,” he said.
Due to the pressures of the ongoing trade war, the U.S. government announced tariff relief payments coming from the USDA. While the payments for the corn crop were minimal — 1 cent per bushel — soybeans saw relief in the form of $1.65 per a bushel, which could be moving some beans at lower prices, he said.
“The $1.65 on soybeans affected the farmers some,” McLaughlin said. “We’ve probably given up some beans, and beans have been sold since farmers knew it was coming. They are adding it to the kitty and saying that’s not too bad. Others are waiting, but I think it helped move some beans.”
When it comes to corn, McLaughlin noted that while he wasn’t necessarily bullish, he believes there is a good floor locked into the market.
“I think we are underpinned pretty good here,” he said. “We’ve got good corn demand. I’m not overly concerned about a huge movement down, and I think a 15 cent rally would come along in corn.”
He suggested possibly hedging a little of the corn crop if the December corn contract offers $4.20 — it’s worth a hard look at that price point.
Adding to the difficulties of long-term planning as planting season approaches is the lack of government reports due to the partial government shutdown that began Dec. 21 and ended Jan. 25.
Farmers and traders missed the Supply and Demand report that was supposed to be released by the USDA on Jan. 11.
“The market is kind of going sideways because it doesn’t have any news,” Hemesath said.
He said that with no news, it was a little more difficult to know where the market would go, but he is still able to use his yield averages over the past couple of years to predict his upcoming crop.
That has him planning to see what prices he might be able to settle into early in the life of a contract, even two years ahead.
“Right now we are looking at unsold bushels for 2018 crop and looking at opportunities for 2019 crop,” Hemesath said. “We are looking out to December of 2019 and even March of 2020 and even considering looking at where the market is at for the 2020 crop year as well.”