Five Common Mistakes in Grain Marketing

Five Common Mistakes in Grain Marketing

Five Common Mistakes in Grain Marketing 2020 Minnesota Crop Insurance Conference Edward Usset, Grain Marketing Economist University of Minnesota Columnist, Corn & Soybean Digest & Farm Futures [email protected] www.cffm.umn.edu Grain Marketing is Simple Behold a seasonal price pattern that has held true for decades! Copyright © 2019 Center for Farm Financial Management, University of Minnesota. All Rights Reserved. Cash corn prices are, on average, lowest at harvest and highest in the spring. based on MN corn prices received by farmers Copyright © 2019 Center for Farm Financial Management, University of Minnesota. All Rights Reserved. Cash soybean prices are, on average, lowest at harvest and highest in the spring. based on MN soybeans prices received by farmers Copyright © 2019 Center for Farm Financial Management, University of Minnesota. All Rights Reserved. About the data… Monthly prices: USDA/NASS Futures prices: CME Group closing prices Cash prices: Corn and soybeans: Pipestone MN Average Iowa prices, 1990-2019 Spring wheat: Red River Valley, 1990-2019 N = 30 and No replication crisis Copyright © 2019 Center for Farm Financial Management, University of Minnesota. All Rights Reserved. A Different Approach to Marketing What is a Marketing Plan? A marketing plan is a proactive strategy to price your grain that considers your financial goals, cash flow needs, price objectives, storage capacity, crop insurance coverage, anticipated production, and appetite for risk Proactive, not reactive, not overactive Copyright © 2019 Center for Farm Financial Management, University of Minnesota. All Rights Reserved. …and not inactive Barney Binless Barney has no marketing plan, no storage and no interest in early pricing. He is our benchmark - his price is the harvest price each year. Copyright © 2019 Center for Farm Financial Management, University of Minnesota. All Rights Reserved. Five Common Mistakes in Grain Marketing 1. The reluctance towards pre-harvest pricing 2. Failure to understand and track your basis 3. Lack of an exit strategy 4. Holding grain in storage too long 5. Thinking you avoid storage costs when you sell grain and buy a call Copyright © 2019 Center for Farm Financial Management, University of Minnesota. All Rights Reserved. Mistake #1 The reluctance towards pre‐harvest pricing (featuring Terry Timer) Are there any seasonal tendencies in futures prices that would favor pre-harvest pricing? Copyright © 2019 Center for Farm Financial Management, University of Minnesota. All Rights Reserved. Terry Timer Terry pays attention to the seasonal highs in new crop futures prices by pricing 25% increments in March, April and May. In 2021, she won’t sell Dec corn <$4.25, Nov soybeans <$9.75. Copyright © 2019 Center for Farm Financial Management, University of Minnesota. All Rights Reserved. Year 1-May 1-Oct Change 2000 2.62 1.99 (0.63) 2001 2.27 2.11 (0.16) 2002 2.20 2.56 0.36 CBOT December Corn 2003 2.33 2.20 (0.13) 2004 3.17 2.06 (1.11) Futures, 2000-2020 2005 2.27 2.06 (0.21) 2006 2.72 2.68 (0.04) 15 years (75%) the market 2007 3.79 3.69 (0.10) declined 2008 6.32 4.84 (1.48) 2009 4.33 3.41 (0.93) 5 years (25%) the market 2010 3.92 4.66 0.74 improved 2011 6.61 5.93 (0.69) 2012 5.39 7.57 2.18 2013 5.51 4.39 (1.12) 2014 5.00 3.21 (1.78) 2015 3.80 3.89 0.09 2016 3.97 3.37 (0.60) 2017 3.95 3.52 (0.43) 2018 4.20 3.66 (0.54) 2019 3.86 3.93 0.06 2020 3.37 Average 3.91 3.58 (0.33) Don’t forget to sell something! but remember your minimum price... Copyright © 2017 Center for Farm Financial Management, University of Minnesota. All Rights Reserved. Year 1-May 1-Oct Change 2000 5.80 4.90 (0.90) 2001 4.34 4.52 0.18 2002 4.56 5.42 0.86 CBOT November Soybean 2003 5.53 6.87 1.34 2004 7.45 5.35 (2.10) Futures, 2000-2020 2005 6.22 5.73 (0.49) 2006 6.26 5.45 (0.81) 12 years (60%) the market 2007 7.84 9.92 2.08 declined 2008 11.93 10.53 (1.40) 2009 9.71 9.18 (0.53) 8 years (40%) the market 2010 9.76 10.57 0.81 2011 13.74 11.79 (1.95) improved 2012 13.93 15.60 1.68 2013 12.09 12.68 0.59 2014 12.26 9.17 (3.09) 2015 9.41 8.77 (0.64) 2016 10.18 9.54 (0.64) 2017 9.65 9.57 (0.07) 2018 10.51 8.58 (1.93) 2019 8.73 9.20 0.47 2020 8.55 Average 8.99 8.67 (0.33) Copyright © 2017 Center for Farm Financial Management, University of Minnesota. All Rights Reserved. Year 1-May 1-Oct Change 2000 5.80 4.90 (0.90) 2001 4.34 4.52 0.18 2002 4.56 5.42 0.86 CBOT November Soybean 2003 5.53 6.87 1.34 2004 7.45 5.35 (2.10) Futures, 2000-2020 2005 6.22 5.73 (0.49) 2006 6.26 5.45 (0.81) 12 years (60%) the market 2007 7.84 9.92 2.08 declined 2008 11.93 10.53 (1.40) 2009 9.71 9.18 (0.53) 8 years (40%) the market 2010 9.76 10.57 0.81 2011 13.74 11.79 (1.95) improved 2012 13.93 15.60 1.68 2013 12.09 12.68 0.59 2014 12.26 9.17 (3.09) Soybeans show the need 2015 9.41 8.77 (0.64) 2016 10.18 9.54 (0.64) for a minimum price! 2017 9.65 9.57 (0.07) 2018 10.51 8.58 (1.93) 2019 8.73 9.20 0.47 2020 8.55 Average 8.99 8.67 (0.33) Year 1-May 1-Oct Change 2000 5.80 4.90 (0.90) 2001 4.34 4.52 0.18 2002 4.56 5.42 0.86 CBOT November Soybean 2003 5.53 6.87 1.34 2004 7.45 5.35 (2.10) Futures, 2000-2020 2005 6.22 5.73 (0.49) 2006 6.26 5.45 (0.81) 12 years (71%) the market 2007 7.84 9.92 2.08 declined 2008 11.93 10.53 (1.40) 2009 9.71 9.18 (0.53) 8 5 years (29%) the 2010 9.76 10.57 0.81 2011 13.74 11.79 (1.95) market improved 2012 13.93 15.60 1.68 2013 12.09 12.68 0.59 2014 12.26 9.17 (3.09) Remove years when Nov 2015 9.41 8.77 (0.64) 2016 10.18 9.54 (0.64) beans were clearly below 2017 9.65 9.57 (0.07) production costs on May 1 2018 10.51 8.58 (1.93) 2019 8.73 9.20 0.47 2020 8.55 Average 9.54 9.07 (0.47) Year 1-May 1-Aug Change 2000 3.35 2.97 (0.38) 2001 3.47 3.16 (0.31) 2002 3.01 3.80 0.80 2003 3.39 3.70 0.32 MGEX September Spring 2004 4.24 3.53 (0.71) Wheat, 2000-2020 2005 3.46 3.50 0.04 2006 4.28 4.69 0.40 12 years (60%) the market 2007 5.24 6.32 1.08 2008 8.77 8.74 (0.03) declined 2009 6.77 6.05 (0.72) 2010 5.49 7.13 1.64 8 years (40%) the market 2011 9.34 8.34 (1.00) improved 2012 7.75 9.38 1.63 2013 8.19 7.42 (0.77) 2014 7.72 6.16 (1.56) 2015 5.45 5.17 (0.28) 2016 5.57 4.85 (0.73) 2017 5.68 7.18 1.51 2018 6.29 6.08 (0.21) 2019 5.21 5.19 (0.03) 2020 5.18 Average 5.63 5.67 0.03 Year 1-May 1-Aug Change Wheat also shows the 2000 3.35 2.97 (0.38) need for a minimum price! 2001 3.47 3.16 (0.31) 2002 3.01 3.80 0.80 2003 3.39 3.70 0.32 MGEX September Spring 2004 4.24 3.53 (0.71) Wheat, 2000-2020 2005 3.46 3.50 0.04 2006 4.28 4.69 0.40 2007 5.24 6.32 1.08 2008 8.77 8.74 (0.03) 2009 6.77 6.05 (0.72) Let’s exclude 11 years 2010 5.49 7.13 1.64 2011 9.34 8.34 (1.00) when the selling price 2012 7.75 9.38 1.63 on May 1 was less than 2013 8.19 7.42 (0.77) 2014 7.72 6.16 (1.56) production costs. 2015 5.45 5.17 (0.28) 2016 5.57 4.85 (0.73) 2017 5.68 7.18 1.51 2018 6.29 6.08 (0.21) 2019 5.21 5.19 (0.03) 2020 5.18 Average 5.63 5.67 0.03 Year 1-May 1-Aug Change MGEX September Spring 2004 4.24 3.53 (0.71) Wheat, 2000-2020 2006 4.28 4.69 0.40 2007 5.24 6.32 1.08 7 years (70%) the market 2008 8.77 8.74 (0.03) 2009 6.77 6.05 (0.72) declined 2011 9.34 8.34 (1.00) 2012 7.75 9.38 1.63 3 years (30%) the market 2013 8.19 7.42 (0.77) improved 2014 7.72 6.16 (1.56) 2018 6.29 6.08 (0.21) Average 6.86 6.67 (0.19) September MGEX Spring Wheat Futures, 1990-2019 107 Don’t forget to sell something! 106 105 104 1-Jun 1-May 103 1-Mar 1-Apr 102 1-Feb Index (January 1 = 100) Index 101 1-Jul 100 Years when May 1 price is higher than production 99 1-Jan costs (excludes 91,93,94,99‐2003,05,10,15‐17,19) 1-Aug 1-Sep 98 approximate dates Copyright © 2019 Center for Farm Financial Management, University of Minnesota.

View Full Text

Details

  • File Type
    pdf
  • Upload Time
    -
  • Content Languages
    English
  • Upload User
    Anonymous/Not logged-in
  • File Pages
    36 Page
  • File Size
    -

Download

Channel Download Status
Express Download Enable

Copyright

We respect the copyrights and intellectual property rights of all users. All uploaded documents are either original works of the uploader or authorized works of the rightful owners.

  • Not to be reproduced or distributed without explicit permission.
  • Not used for commercial purposes outside of approved use cases.
  • Not used to infringe on the rights of the original creators.
  • If you believe any content infringes your copyright, please contact us immediately.

Support

For help with questions, suggestions, or problems, please contact us