Grain Marketing Highlights – September 9, 2011

Carl German, Extension Crops Marketing Specialist;

USDA September Supply and Demand Report to Rule the Day
USDA’s September U.S. and World Supply and Demand report will be released next Monday, September 12. Most private firms have made forecasts expecting USDA to lower their production estimates for 2011 U.S. corn and soybean production, with one exception where the soybean production estimate was higher than USDA’s August forecast. On Monday we will know the answer to whether the corn and soybean production estimates are lowered or not, and to what extent? Production concerns and outside market forces have kept commodity markets in an extremely volatile mode over the past couple of weeks. Recent highs for new crop corn and soybeans were set on August 30 and 31. New crop corn closed at $7.75 per bushel with a high for the day at $7.77 on August 30. New crop soybeans closed at $14.57 per bushel on August 31 with the high for the day at $14.65. Monday’s report will determine the next price move. If the production forecast is lowered significantly then we could see the recent highs taken out. Currently, before the open, Dec ‘11 day trade corn futures are at $7.48; Nov ‘11 soybeans at $14.20; and July ‘12 SRW wheat at $8.10 per bushel. Position squaring/profit taking, demand reduction, and economic uncertainty in the U.S. and Europe are all contributing factors to the break in commodity prices ahead of the report.

Market Strategy
This may not be the year that a farmer would want to store the physical commodity in hopes of achieving a higher price. As long as basis bids are firm, it is likely to be advisable to take the cash sale at harvest. Quoted this morning, the new crop corn basis bid into Salisbury was 15 under DEC and the new crop soybean basis was even. If for some reason STAYING POWER were to become an issue one could consider selling the cash commodity and purchasing call options. For example, the premium for a Mar ‘12 corn call with a strike price of $8.00 is currently costing 50 cents per bushel and the premium for a $15.00 Mar ‘12 soybean call is costing 57 cents per bushel.

An analysis of the September report will be released on Monday.

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