By John DePutter & Dave Milne – April 9, 2019
“Farmers have been facing stagnant corn prices for nearly five years now, something that may not change this spring.”
– AgWeb, Apr. 5, 2019
What it means:
Producers will need a sharp pencil and lots of marketing savvy.
Of course, where corn prices ultimately end up will depend heavily on the weather. But even with widespread planting delays expected in the American Midwest this year due to overly wet conditions, the corn market still hasn’t reacted much. That can be at least partially attributed to a still-heavy old-crop supply that will cushion any new-crop production shortfall. The lack of excitement can also likely be chalked up to the mostly correct assumption US farmers always ending getting their crops in the ground, regardless of planting weather.
So, in the absence of a major drought or washout at some point during the growing season, that leaves farmers facing the prospect of just-static returns amid increasing input costs.
On the input side, there may not be a whole lot of wiggle room. Tightening farm financials over the last few years mean most producers have likely cut as close to the bone as they can. For some, that has likely meant scaling back on fertilizers and other such inputs to the point where yields may be negatively impacted. Others may have decided to reduce the amount of land they rent.
That leaves the marketing side. As can be seen on the 10-year chart here, corn has basically just chopped sideways since 2015, with the occasional spike up mostly related to a summer weather scare. It’s a relatively unimpressive picture. And let’s all agree, the monumental high in 2013 of over US$8/bu is a distant memory and not likely to be revisited any time soon.
With the benefit of hindsight, we can easily pick out the best opportunities to sell. The problem of course is we never know exactly when those rallies will occur, how long they will last and how high they will take prices.
There are probably many farmers out there who held on during a spike up, hoping to hit the price peak with a big sale. But once missed, those same farmers likely held on too long, waiting for the peak to return and then ultimately being forced to sell at a sharply discounted level.
The key to successful marketing is not necessarily knocking it out of the park with a single sale at the price peak. It’s more about being patient, keeping in touch with the market and timing small sales when a profit is offered.
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