Good Records, Marketing Critical

By Steve Johnson, Iowa State University Extension

Farmers who are dealing with delayed and prevented planting decisions need to keep good records and practice great communications skills.

Keep records: by farm field, crop, date and acres planted. You will need these for both your crop insurance agent and eventually the Farm Service Agency (FSA) office.

Crop insurance coverage will depend on the date you planted that crop as you lose 1 percent coverage per day after your final planting date. The final planting dates for corn were May 25 in most of South Dakota and May 31 for the southeastern part. For soybeans, the final plant date for the entire region was June 10.

This information will be needed for both crop insurance and FSA acreage certification purposes. The FSA office will require a completed CCC-576 form for prevented planting acres and form 578 for planted acres. Make sure you work well in advance of the July 15 filing deadline with your crop insurance agent to avoid late filing fees.

If a crop insurance adjuster approves acreage for prevented plant, document exactly what you heard, what acres qualify and what you can and cannot do with those acres. Prevented plant deadlines are 25 days after the final planting date for both corn and soybeans, respectively.

Capturing higher corn futures prices

This is a critical time for marketing both old and new crop bushels. Spring is when the greatest uncertainty for corn production in the world occurs. That is because nearly 85 percent of the global feed grains are grown in the northern hemisphere.

When late, wet corn planting conditions occur, speculative investors often called funds must “short-cover” their previous positions, so they go “long futures.” This creates a sudden rally in the corn futures markets called seasonals, which often leads to the highest prices of the year and sometimes multiple years.

Selling into these spring price rallies has worked well the past four years. However, it is much easier for a farmer when the late, wet corn planting conditions are occurring in some other region of the Corn Belt. The weather-scare rallies in May, June and July the past few years have been great opportunities to sell old crop bushels as well as make new crop sales.

Spring showers bring higher corn prices

Look at evidence of short-covering in corn futures contracts that occurred the week of May 13, 2019. The life-of-contract low for December ‘19 corn futures was reached early in the trade season on May 13 at $4.63 ¾ per bushel. That same futures contract rallied 90 cents higher by May 29 to $4.54 per bushel. Similar rallies have occurred in December corn futures in each of the past four years.

• 2018 – December ‘18 corn posted a low on April 20, then rallied 27 cents until May 24 with a seasonal high of $4.29
• 2017 – December ‘17 corn posted a low on April 21, then rallied 38 cents until July 11 with a seasonal high of $4.17
• 2016 – December ‘16 corn posted a low on April 25, then rallied 70 cents until June 17 with a seasonal high of $4.49
• 2015 – December ‘15 corn fell 20 cents lower from April 20 until June 15, and then rallied 70 cents by July 11 with a seasonal high of $4.54

Before getting too bullish regarding the December ’19 corn futures price, remember the U.S. corn ending stocks are expected for the third year in a row to remain above two billion bushels come August 2019. Many farmers still have unpriced old corn crop that might limit their focus on pricing new crop bushels. Rather than thinking you could sell all your new crop bushels at the highest futures price possible, consider the importance of managing cash flow needs for your farm this fall and winter. Also, understand basis trends in your area, futures price carry, as well as the cost of storing bushels beyond harvest.

Map your marketing plan, set target prices

Establish now both a timeframe and potential futures target prices for those new crop bushels. Using the previous four years as an example, you might expect the best December ’19 corn futures price to occur somewhere between $4.17 and $4.54 per bushel. In addition, the highest futures price will likely occur in a period of about 50 days, between this May 24 and July 14. Other marketing strategies might include:

• Use a variety of marketing tools. Hedge-to-arrive contracts for bushels committed to delivery and generating cash flow needs. Futures hedges and/or put options to protect futures prices, but not committing bushels to delivery.
• Scale-in sales as futures prices are moving higher, making sales every 5 to 10 cents and in 5,000 bushels increments.
• Place market orders now with your merchandiser and/or commodity broker.
• Expect the highest futures price to occur intraday, thus the importance of market orders.

Johnson is a farm management specialist. He can be reached at [email protected].