Each year since the 2014 growing season, both corn and soybean futures prices peaked somewhere between early April and mid-July. Farmers were able to pre-harvest market a portion of their new crop corn and soybean crops annually at prices that proved to be much higher than those received at harvest. Those farmers then delivered priced bushels at or shortly after harvest and avoided additional storage and interest charges and generated necessary cash flow.

Most years, corn futures prices tend to rally in the early spring months and peak by early summer. This reflects the period of the greatest uncertainty of production in the northern hemisphere. Soybean futures prices tend to move higher in both the late fall and winter months when southern hemisphere production is threatened. Then soybean prices typically rally again in the spring through the early summer months, similar to corn. So come late July through harvest, the highest seasonal prices for both crops have occurred. Futures prices then tend to sell off as risk premium is removed with the confirmation of large northern hemisphere crops.

So why don’t most farmers take advantage of these seasonal price trends? The causes can vary but tend to be a combination of procrastination, fear of being wrong and the lack of a crop marketing plan with the discipline to implement that plan.

Need for a written crop marketing plan

Farmers who have a written marketing plan develop a purpose and accountability to market that grain ahead and align their cash flow needs. Storage and interest charges are not free and many farms are challenged by their ability to find profitable margins. In addition, holding multiple years of corn or soybean crops in storage increase ownership costs and perhaps increases the risk of grain quality. These factors can lead to the erosion of valuable working capital.

The biggest challenge might be setting objectives and planning ahead. Start by considering your cash flow needs for the fall and winter months. A crop marketing plan should include these five items.

1) Your cost of production and breakeven prices

2) Both futures and cash price objectives, recognizing local basis patterns

3) Revenue protection crop insurance

4) Crop strategies and tools to be used

5) Percent of expected new crop production to be priced at various price and time objectives; whichever occurs first.

Put the plan in writing with objectives in place going into the spring months. Your price objectives should reflect the futures price when above the projected prices used for revenue protection crop insurance. Those prices were determined in the month of February 2018 and were $3.96 per bushel for corn and $10.16 per bushel for soybeans, respectively.

Utilize a variety of marketing tools

Farmers should use a variety of marketing tools to spread their risks and attempt to time sales in the spring months to capture futures when prices are high and/or basis when it narrows. These events tend not to occur at the same time. Consider the use of HTA (hedge-to-arrive) contracts using November soybeans and December corn futures contracts. Separate bushels that you are committing to delivery versus those that simply have the futures prices protected. The combination of low futures prices and wide basis, especially at harvest, has created the need for more aggressive pre-harvest marketing strategies.

Learn more about developing your crop marketing plan by searching for the Iowa Commodity Challenge on the internet. You’ll find 15 short videos, a 65-page marketing tools workbook and a variety of weekly tracking tables and charts.

Steve Johnson is an Iowa State University Extension and Outreach farm management specialist. He can be reached at sdjohns@iastate.edu.