New grain bid comparison tool
Storing old crop corn and soybeans without reasonable time and price objectives during the past few months proved hazardous once again. Most farmers already ran out of cash trying to store the record 2016 crop, so they already made most their cash sales and are preparing for the 2017 harvest. Others took the risk with their extra old crop bushels thinking that a late summer futures price rally would allow them to at least break-even on bushels stored for nearly 11 months. The odds of such a futures price rally were low, and didn’t pan out again in August and September.
As harvest approaches, expect very few opportunities for higher cash prices as lower futures seasonal prices are combined with widening basis (local cash minus nearby futures). This will be especially true with bushels stored commercially with wider than normal basis likely to persist prior to and during the 2017 harvest. In addition, storage and interest costs could approach 50 cents per bushel if stored commercially over the past since the 2016 harvest. That amount will still need to be subtracted to determine the final net cash price received. Thus, a likely negative return to storage for those 2016 bushels when they finally get marketed.
Very few cash sale strategies remain for old crop bushels without adding additional storage costs or futures price risk. Even co-mingling old and new crop corn bushels on-farm could be risky as quality issues have emerged with some of the 2016 crop. In addition, a crop insurance adjuster should measure grain bins for crop insurance purposes containing old crop bushels stored on-farm before adding new crop bushels. You should have already contacted your crop insurance agent to request a grain bin measurement.
Where and when will the marketing opportunities exist? With the 2017 yield variability across Iowa and surrounding states – and perhaps a harvest that begins a little later than normal – regional basis differences have emerged. Some processors have narrowed old crop basis to assure a flow of bushels out of farmers’ hands before harvest. Once harvest gets underway, expect that basis to widen for much of October barring weather delays. Think about checking various processor cash bids in your region, especially if you have a semi-tractor available to deliver those bushels. ISU Extension and Outreach has developed an easy way to compare various cash grain bids while reflecting your transportation costs. The “Grain Bid Comparison Tool”, file A3-41 can be found on the ISU Ag Decision Maker web site; or, simply search the internet for “Grain Bid Comparison Tool.”
Simply collect up to eight cash grain bids from various locations and input these cash prices into the Excel spreadsheet along with your own estimates of operating costs and distance to haul the grain. For new crop corn bushels, adjustments should be made for higher moisture content in corn to adjust for drying and shrink discounts. This decision tool allows for comparing a variety of “what if” scenarios for selling grain at various cash prices while considering your own transportation costs. Keep this tool handy after harvest, as many farmers will need to generate cash flow from crop sales during the late fall and winter months.
Steve Johnson is an Iowa State University Extension farm management specialist. Contact him at email@example.com.
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