Marketing

By John Berry

I also expect prices being offered would be more aggressive. What’s up? Remembering that price is a function of the supply / demand balance let’s look around us. Have you noticed what the largest global importer of commodities is experiencing? Additionally, our currency is relatively strong, ethanol production has plateaued, the 2014 harvest is not completely off the farm, and as the below chart shows; the U.S. is not as large a part of the global ag commodity market as it was in the past.

In 1980 the U.S. had roughly ½ of the global export market for our primary grains. Today we have between 1/3 and ¼ of this growing market. Although our crops remain a significant part of the global food supply other countries are playing a bigger and bigger role in feeding us all. The U.S. harvest does not dominate as it once did.

Given all the above I ask you to recall one of my main tenants of grain marketing – although it certainly is interesting to talk about, it really doesn’t matter how we got here. The question is “what are we going to do?”

Harvest approaches and with what looks to be a respectable number of bushels in the field suggesting short term buyer needs can be met – “do we have access to adequate storage?” and, “should we store after harvest?”

Farmers are telling me current prices are not very exciting and they will not be delivering any more un-priced grain at harvest than necessary. I do see the reasoning behind part of this decision. Current cash basis and carry in the futures give an early indication for a return to storing corn. Soybeans are a different story with little indication there is going to be carry and so limited opportunities to lock in a return to storage.

Next week we will review what carry is all about. For now consider, the only way to capture a return to storage is to forward price the stored crop with your normal cash buyer or take a futures contract.

Source:psu.edu