Grain Marketing Highlights – August 31, 2012

Carl German, Extension Crops Marketing Specialist; clgerman@udel.edu

Pro Farmer Tour Pegs 2012 U.S. Corn and Soybean Production Estimates Below August Projections
The Pro Farmer Crop Tour has gained notoriety over the years conducting an annual tour of potential U.S. corn and soybean production in mid-August each year. On Friday, August 24 Pro Farmer released their 2012 U.S. corn and soybean production estimates. The U.S. corn crop was estimated at 10.478 billion bushels with an average yield of 120.25 bushels per acre. The soybean crop was estimated at 2.6 billion bushels at an average yield of 34.8 bushels per acre. Both estimates were below USDA’s August projections of 10.779 billion bushels for U.S. corn and 2.692 billion bushels for U.S. soybeans. USDA will release their next revision of 2012 corn and soybean supply and demand projections on September 12.

Marketing Strategy
With the arrival of an early 2012 harvest grain producers have a new set of questions to answer. Should I store corn with Dec ‘12 new crop futures currently bidding at $8.13 per bushel (CME Group –CBOT)? Should I store $17.57 per bushel soybeans? Neither question can be easily answered. Some would question one’s sanity to place corn or soybeans in the bin for sale at a later date with prices at such lofty levels. However, even though there are not clear cut answers to these questions there are a few considerations that might help one to decide.

First, look at the carry or spread between futures contract months. It is duly noted that on Thursday, August 30 no carry exists in either the corn or soybean futures markets. We then might conclude that the markets are telling us that they want to buy your corn and soybeans now, bearing in mind that there are no absolutes.

Second, there is the matter of price. Some would argue that the corn market has to bid higher from current levels in order to ration supply so that we don’t run out before the next corn harvest begins. Others argue that the price of corn is already high enough to get that job done. Additionally, alternative supply sources for importing corn are currently being employed. New crop corn and soybean basis bids are being kept in check as a result, with new crop corn and soybeans currently in the ball park of 15 under locally. New crop corn has traded in a sideways pattern for the past month and will eventually break out moving either higher or lower depending upon whether new information is considered bullish or bearish. Simultaneously, new crop soybeans have been trending higher. It is going to take some time to sort this out. 2012 U.S. corn and soybean production most likely won’t be known until the January Supply and Demand report is released.

Third, the soybean market is said to be different than corn. The difference being that price will ration corn supply so that we don’t run out before the next harvest. The concern for soybeans, after experiencing a reduced 2012 crop in the Southern Hemisphere and a short crop in the U.S., is that supplies could possibly run dry by February. We are now beginning to believe that soybeans priced at the $20.00 per bushel mark (+ or -) is within the realm of probability.

So back to the original questions — should one store either corn or soybeans this fall? As laid out above one might suggest that it wouldn’t be out of the question to consider keeping a few beans around and maybe some corn in which case one will need to consider the next question. If I put some of the crop in the bin should I protect the downside?

For technical assistance on making grain marketing decisions contact Carl L. German, Extension Crops Marketing Specialist.

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