COLUMBIA, Mo.??It is likely that the least profitable market option at harvest this fall is to hold grain in the bin,? said Brian Willott, grains analyst, with the University of Missouri Food and Agricultural Policy Research Institute (FAPRI).
Corn and soybean producers are seeing stronger prices at harvest this year than they?ve seen in years.
?Farmers may be so focused on harvesting the crop, they may miss marketing opportunities,? Willott said in an outlook teleconference from the MU campus.
The quarterly outlook sessions are delivered by telephone to meetings in University Outreach and Extension centers across the state. Regional extension specialists noted light attendance because of favorable harvesting conditions in the earlier-than-usual harvest.
?The market basis is pulling the crop into the market,? Willott said. Basis is the difference between the price on the Chicago Board of Trade and the local market.
?That basis price on corn is under a nickel in most cases,? Willott said. A recent Chicago corn price was $2.57 per bushel. The price in Kansas City was $2.54 per bushel.
?Capture that basis on paper,? Willott said. ?The basis can go away quickly.? Producers who want to speculate on a future price rise could sell their cash grain and then buy future options. Or, they could buy a ?put? which allows them to sell a futures contract at a set price.
?It?s better to hold paper than grain in the bin when the basis is strong. Paper won?t rot and go bad before spring,? Willott said. ?Storing the grain and riding the market unprotected is a gamble.?
In the most recent outlook from MU FAPRI, corn is projected at $2.55 per bushel and soybeans at $5.55 for the year-average price.
Based on prices at harvest, the soybean outlook is flat to lower, Willott said. ?The basis is telling us to sell.?
Willott anticipates that estimates on the size of the crop will go up as harvest is finished. Reports from regional extension specialists indicated wide ranges in yields, often within the same county. While some were reporting farm averages of over 200 bushels per acres, others had seen 60-bushel yields.?
Willott noted, ?Combines are better at determining yield than field surveys before harvest.?
Some market analysts have already signaled a larger crop than USDA has predicted, Willott said. The Chicago futures market reacted with price declines. The need for careful marketing strategies is increased by the prospect of no government LDP (loan deficiency payments) payments or counter-cyclical payments (CCP), Willott said. The LDP has been available under the old farm bill and continues under the current legislation. The new farm bill added the CCP.
For the last three years, farmers didn?t have to think as much about downside price risks, because prices were low and the LDP was there, Willott said. Now that the prices have improved, there is no government protection against the risk of lower prices.