Grain Crop Marketing

By John Berry

Ag Marketing Educator

One reason for this occurrence is the planting season for the U.S. corn crop. Once we get to June the majority of planted acres are set. If we are then expecting “normal” weather for the remainder of the growing season markets can estimate the size of the harvest, compare this to projected demand, and then generate a price range for the yet-to-be-produced crop. While any specific year may not follow this pattern we can use this information to consider taking price protection on at least a conservative portion of the expected 2015 harvest.

Working with six grain marketing discussion groups over the 2013-2014 meeting season we generated a chart illustrating how the available price risk management tools react to changes in markets. The below chart starts with local cash and futures new crop prices available on December 8, 2013 and concludes with these same crop prices available mid-October, 2014 illustrating how price protection worked in one specific season.

A marketing season is considered to extend 18 months and each one can present us with different risks. Deciding on a price risk management tool is often perplexing. The outcome of our decisions can be enhanced if we mix up our strategy choices and remain as flexible as feasible. Obviously, the above chart is somewhat simplistic. However, it does show how a simple, straight forward effort to manage exposure to market price movements played out for the recent 2014 fall field crop harvest.

Source:psu.edu