By John Berry
Having unpriced bushels as we near harvest had some grain producers hoping the harvest pundits calling for severe yield reductions would be correct in their guesses. At this point it looks like a burdensome harvest will materialize.
The USDA Crop Production Report released on September 12th didn’t cause much of a price move, and also disappointed many bears. Given the spotty weather trouble across parts of the primary U.S. production areas during pollination some were calling for significant total production reductions compared to the August reporting. Some continue to predict our total production will be much less than the USDA has guesstimated.
Quoting Darrel Good , Department of Agricultural and Consumer Economics, University of Illinois “First, available evidence suggests that the NASS final estimate of planted, and therefore harvested, acreage will not differ appreciably from the current estimates for either corn or soybeans. Second, the more recent (20 years) historical pattern of changes in yield forecasts from September to January suggest slightly higher odds for January corn and soybean yield estimates to exceed the September forecasts than to be below the September forecasts. The longer history (40 years) also suggests higher odds of a soybean yield increase, but reflects more of a toss-up for corn yield changes. It seems unlikely, however, that production estimates for either crop will change enough to materially alter the projected supply and consumption balance for the 2016-17 marketing year.”
The message I receive is that prices cannot be reasonably expected to rise dramatically. If we are concerned about what to do with 2016 bushels we have not yet committed let’s remember the concept of "carry". There are only three possible marketing strategies to choose from; 1) sell off the combine, 2) put in storage unpriced, and 3) put in storage priced for future delivery. Carry can help us make the decision on which strategy might be most beneficial.
For some insight into the cost of drying, calculating shrink, and how to determine the value of additional storage I find the University of Iowa Extension has useful spreadsheets and resources.
Source:psu.edu