Celebrity Squares Search for a Pre-Harvest Advantage

Copyright © 2005 Center for Farm Financial Management, University of Minnesota. All Rights Reserved.

Celebrity Squares Celebrity Squares Search for a Pre-Search for a Pre-

Harvest AdvantageHarvest Advantage

Edward C. Usset, Grain Marketing SpecialistCenter for Farm Financial ManagementUniversity of Minnesota email: [email protected]


A comprehensive whole farm financial planning and analysis system

A tool to help develop, monitor and implement marketing plans for crops and milk

Center for Farm Financial Management

1-800-234-1111 www.cffm.umn.edu


WtG 1: The Pre-Harvest Marketing Advantage

WtG 2: Launch Your Pre-Harvest Marketing Plan

Pre-harvest marketing is a broad view of the market, trying to take advantage of early seasonal price tendencies. Crop insurance is a critical part of marketing.

Winner of the 2004 AAEA Distinguished Extension Group Award!


Call CFFM at 800-234-1111 for more information about how to sponsor a “Winning the Game” workshop in your

town.

Post harvest marketing is a practical approach to the current environment, adapting to market signals and incentives. Tactics may change from one year to the next.

WtG 3: The Post Harvest Marketing Challenge


Agenda• Meet our celebrity producers • Discuss their pre-harvest marketing

styles• Can our celebrities find a pre-harvest

advantage?• Can we improve their plans?• 2006 pre-harvest plans


Why is Marketing Important?

• The average farm earns 20-30 cents per bushel (including gov’t payments). Just 10 cents more per bushel could increase net income by 33-50%!

• Great marketing is not finding the high price. It’s finding an extra 10-20 cents per bushel with a solid plan that avoids mistakes.Can our celebrities find a dime?


What is the Pre-Harvest Advantage?

Early sales could be our best sales. Can we find a dime in

pre-harvest marketing?


Let’s meet Let’s meet our our

celebrities…celebrities…


Barney Binless

Barney has no storage and no interest in pre-harvest marketing. He is our benchmark - his price is the harvest price each year.


Grandma

Grandma likes to keep her marketing plan simple. She prices 10% of her new crop corn, soybeans and wheat each month from January thru July – 70% of her total expected crop.


Justin Price

Justin only pays attention to prices. He is willing to price 25% increments at… $2.50, $2.75 & $3.00 Dec. Corn $5.50, $6.25 & $7.00 Nov. Soybeans$3.50, $3.85 & $4.20 Sept. Wheat


Corn

Yield (bu./acre) 152.0

Direct & overhead $2.17

With labor & mgmt $2.35

Less gov’t pay & other

$2.10

Southern MN Cost of Production FINBIN Average, Cash Rent, 2000-2003

$2.50 December futures, or $2.10 cash price (the harvest basis averages 40 cents under), is consistent with a break-even cost of production.

“The break even price to cover all costs and a return to labor & management”


0%

20%

40%

60%

80%

100%

>2.50

>2.75

>3.00

>3.25

>3.50

>3.75

>4.00

Life-of -Contract High Closing Price

At Contract Expiration

Pricing TargetsFrequency that Chicago December Corn Futures

Exceeded Given Price Level, 1980-2005


0%

20%

40%

60%

80%

100%

>2.50

>2.75

>3.00

>3.25

>3.50

>3.75

>4.00



Pricing TargetsFrequency that Chicago December Corn Futures



Soybeans

Yield (bu./acre) 42.9

Direct & overhead $5.47

With labor & mgmt $5.99

Less gov’t pay & other

$5.06

Southern MN Cost of Production FINBIN Average, Cash Rent, 2000-2003

$5.50 November futures, or $5.00 cash price (the harvest basis averages 50 cents under), is consistent with a break-even cost of production.

“The break even price to cover all costs and a return to labor & management”


0%

20%

40%

60%

80%

100%

>5.50

>6.00

>6.50

>7.00

>7.50

>8.00

>8.50



Pricing TargetsFrequency that Chicago November Soybean Futures



0%

20%

40%

60%

80%

100%

>5.50

>6.00

>6.50

>7.00

>7.50

>8.00

>8.50



Pricing TargetsFrequency that Chicago November Soybean Futures



Terry Timer

Terry pays attention to the seasonal highs in new crop futures prices by pricing 25% increments in March, April and May. But she won’t sell if Dec. corn <$2.50, Nov. soybeans <$5.50, or Sept. wheat <$3.50.


Contract

1-May 1-Oct

Change

1980 2.95 3.49 0.54

1981 3.77 2.87 (0.90)

1982 2.93 2.20 (0.73)

1983 3.03 3.53 0.50

1984 3.04 2.78 (0.26)

1985 2.64 2.26 (0.39)

1986 2.04 1.77 (0.27)

1987 1.87 1.84 (0.03)

1988 2.27 2.95 0.68

1989 2.64 2.39 (0.26)

1990 2.70 2.29 (0.42)

1991 2.53 2.54 0.01

1992 2.53 2.12 (0.41)

1993 2.43 2.43 0.00

1994 2.58 2.14 (0.44)

1995 2.63 3.11 0.48

1996 3.33 2.90 (0.44)

1997 2.76 2.56 (0.20)

1998 2.62 2.05 (0.58)

1999 2.31 2.05 (0.26)

2000 2.62 1.99 (0.63)

2001 2.27 2.11 (0.16)

2002 2.20 2.56 0.36

2003 2.33 2.20 (0.13)

2004 3.17 2.06 (1.11)

2005 2.27 2.06 (0.21)

Average 2.63 2.43 (0.20)

CBOT December Corn Futures, 1980-200519 years (73%) the market declined7 years (27%) the market improved14 years the market declined more than 25 cents!


Chicago December Corn Futures, 1980-2005 average

1-J

an

1-F

eb

1-M

ar

1-A

pr

1-M

ay

1-J

un

1-J

ul

1-A

ug

1-S

ep

1-O

ct

1-N

ov

1-D

ec

235

240

245

250

255

260

265

270

approximate dates

cents

per

bush

el

Pre-Harvest Seasonal Price Trends


Contract

1-May 1-Oct Change

1980 6.45 8.12 1.67

1981 8.27 6.46 (1.81)

1982 6.78 5.29 (1.50)

1983 6.78 8.58 1.80

1984 7.13 5.90 (1.24)

1985 6.06 5.14 (0.93)

1986 5.24 4.88 (0.36)

1987 5.34 5.45 0.11

1988 7.14 8.17 1.04

1989 7.24 5.77 (1.47)

1990 6.55 6.05 (0.51)

1991 6.09 5.89 (0.20)

1992 6.05 5.33 (0.72)

1993 5.96 6.18 0.22

1994 6.28 5.38 (0.90)

1995 6.06 6.37 0.32

1996 7.58 7.49 (0.08)

1997 6.96 6.21 (0.76)

1998 6.17 5.15 (1.02)

1999 5.14 4.81 (0.33)

2000 5.80 4.90 (0.90)

2001 4.34 4.52 0.18

2002 4.56 5.42 0.86

2003 5.53 6.87 1.34

2004 7.45 5.35 (2.10)

2005 6.22 5.73 (0.49)

Average 6.27 5.98 (0.30)

CBOT November Soybean Futures, 1980-200517 years (65%) the market declined9 years (35%) the market improved12 years the market declined more than 50 cents!


Chicago November Soybean Futures, 1980-2005 average1-

Jan

1-Fe

b 1-M

ar

1-Apr

1-M

ay

1-Ju

n

1-Ju

l

1-Aug

1-Sep

1-O

ct

1-N

ov

590

595

600

605

610

615

620

625

630

635

approximate dates

cents

per

bush

elPre-Harvest Seasonal Price Trends


Contract

1-May

1-Aug Change

1980 4.13 4.68 0.55

1981 4.65 4.21 (0.44)

1982 4.05 3.88 (0.17)

1983 4.00 4.08 0.09

1984 3.90 3.96 0.06

1985 3.63 3.19 (0.44)

1986 2.92 2.68 (0.25)

1987 2.87 2.60 (0.27)

1988 3.13 4.12 0.99

1989 4.19 3.93 (0.26)

1990 3.61 2.81 (0.80)

1991 2.95 2.88 (0.07)

1992 3.55 3.06 (0.49)

1993 2.99 3.15 0.15

1994 3.34 3.34 (0.00)

1995 3.65 4.73 1.08

1996 5.93 4.70 (1.23)

1997 4.39 3.92 (0.48)

1998 3.61 3.08 (0.53)

1999 3.33 3.44 0.11

2000 3.35 2.97 (0.38)

2001 3.47 3.16 (0.31)

2002 3.01 3.80 0.80

2003 3.39 3.70 0.32

2004 4.24 3.53 (0.71)

2005 3.46 3.50 0.04

Average 3.68 3.58 (0.10)

MGEX September Spring Wheat, 1980-200516 years (62%) the market declined

10 years (38%) the market improved

13 years the market declined more than 25 cents!


September Spring Wheat Futures, 1980-2004 average1-

Jan 1-

Feb

1-M

ar

1-Apr

1-M

ay

1-Ju

n

1-Ju

l

1-Aug 1-

Sep

350

355

360

365

370

375

approximate dates

cent

s pe

r bu

shel

Pre-Harvest Seasonal Price Trends


Peter Paperfarmer

Peter likes Terry’s approach to pricing but he “re-owns” each sale with the purchase of a call. He gets Terry’s price, plus any profit or loss from buying an at-the-money December corn call option and holding to September 15 (November soybean calls, Sept wheat calls).


Date Cash Futures/Options Action

April Elevator bidding 40 under for new crop corn

Dec futures @ $2.75280 calls cost 17 cents

Forward contract for $2.35 and buy December 280 calls for 17 cents

Worst case scenario? (i.e. minimum price)$2.35 cash price - 0.17 option cost – 0.01 fee = $2.17

minimum price = grain selling price – premium paid for calls - fees

Best case scenario? Poised for profits should December futures go higher than $2.97 ($2.80 + 0.17 + 0.01)

No limit to your upside potential!

Peter Paperfarmer

Meet Our Celebrities…


About the search: The search for a pre-harvest advantage took place in SW Minnesota (43 under average corn basis, 51 under for soybeans) using actual prices for a 25-year period, 1980-2004. All pre-harvest sales used December or November futures less the actual harvest basis. LDP’s were not considered.

Celebrity Squares Search for a Pre-Harvest Advantage –

Corn/Soybeans


Barney Binless gets the Tuesday price between October 12-18.

Grandma sells December or November futures each Tuesday between the 4th and 10th of the month, January-July, less the actual harvest basis.

Justin Price sells when December new crop futures reaches $2.50, $2.75, and $3.00 per bushel (or $5.50, $6.25, and $7.00 November soybeans), anytime starting November 1 of a year earlier.


Corn/Soybeans


Terry Timer sells December or November futures each Tuesday between the 4th and 10th of March, April and May, less the actual harvest basis. She will not sell December corn futures less than $2.50 or November soybean futures less than $5.50, or after June 1.

Peter Paperfarmer shadows Terry but “re-owns” each sale with an at-the-money December corn call or November soybean call, sold on September 15. Option premiums before 1990 were estimated.


Corn/Soybeans


Celebrity Results Corn, 1980-2004

crop year BarneyGrandm

a Justin Terry Peter1980 $2.74 $2.34 $2.29 $2.29 $2.44 1981 $2.25 $2.75 $2.66 $2.83 $2.62 1982 $1.83 $2.28 $2.71 $2.34 $2.17 1983 $2.93 $2.50 $2.40 $2.56 $2.74 1984 $2.54 $2.64 $2.62 $2.66 $2.53 1985 $2.10 $2.38 $2.42 $2.43 $2.31 1986 $1.20 $1.47 $1.20 $1.20 $1.20 1987 $1.35 $1.26 $1.35 $1.35 $1.35 1988 $2.45 $2.12 $2.38 $2.45 $2.45 1989 $1.97 $2.14 $2.12 $2.16 $2.04 1990 $1.88 $2.11 $2.07 $2.14 $2.04 1991 $2.02 $2.05 $2.03 $2.12 $2.041992 $1.79 $2.15 $1.90 $2.17 $2.04 1993 $2.13 $2.12 $2.17 $2.13 $2.13 1994 $1.76 $2.04 $2.00 $2.09 $1.98 1995 $2.71 $2.30 $2.35 $2.25 $2.39 1996 $2.59 $2.87 $2.59 $2.91 $2.74 1997 $2.38 $2.23 $2.33 $2.35 $2.22 1998 $1.76 $2.05 $2.09 $2.11 $1.95 1999 $1.42 $1.65 $1.55 $1.42 $1.42 2000 $1.63 $1.87 $1.74 $1.98 $1.82 2001 $1.60 $1.81 $1.72 $1.71 $1.65 2002 $2.33 $2.17 $2.39 $2.33 $2.33 2003 $1.90 $2.04 $1.98 $1.98 $1.94 2004 $1.73 $2.35 $2.29 $2.58 $2.35

1980-2004 avg. $2.04 $2.15 $2.13 $2.18 $2.12 Worst price? 16 3 4 4 4Better than

Barney NA 17 18 15 14

Remember – 25% of Justin, Terry and Peter’s price is the harvest price, as is 30% of Grandma’s price.


Barney

Average 2.04

WorstPrice * 16

Better than Barney *

NA * Out of 25 years

Let’s compare to Barney Binless!Celebrity Results Corn, 1980-2004



Barney

Grandma

Average 2.04 2.15

WorstPrice * 16 3


NA 17 * Out of 25 years

• Grandma found the dime!

• High odds of a better year

• Slow but steady adds value!

Barney vs. Grandma


Barney

Grandma

Justin

Average 2.04 2.15 2.13

WorstPrice * 16 3 4


NA 17 18 * Out of 25 years

Celebrity Results Corn, 1980-2004Barney vs. Justin • Justin found

the dime!• High odds

of a better year

• Price targets work!


Barney

Grandma

Justin Terry

Average 2.04 2.15 2.13 2.18

WorstPrice * 16 3 4 4


NA 17 18 15* Out of 25 years

Celebrity Results Corn, 1980-2004Barney vs. Terry

• Terry found 14 cents!

• Good odds of a better year

• Timed selling works too!


Barney

Grandma

Justin Terry Peter

Average 2.04 2.15 2.13 2.18 2.12

WorstPrice * 16 3 4 4 4


NA 17 18 15 14* Out of 25 years

Celebrity Results Corn, 1980-2004Barney vs. Peter

• Even Peter found 8 cents!

• Ok odds of a better year

• Options cost him 6 cents


Barney

Grandma

Justin Terry Peter

Average 2.04 2.15 2.13 2.18 2.12



NA 17 18 15 14* Out of 25 years



Celebrity Results Soybeans, 1980-2004crop year Barney

Grandma Justin Terry Peter

1980 $7.57 $6.42 $6.64 $6.18 $6.95 1981 $5.87 $6.80 $7.06 $6.98 $6.58 1982 $4.98 $5.81 $6.54 $5.92 $5.65 1983 $8.02 $6.38 $6.32 $6.40 $7.56 1984 $5.92 $6.49 $6.33 $6.65 $6.33 1985 $4.72 $5.32 $5.51 $5.42 $5.20 1986 $4.25 $4.54 $4.44 $4.25 $4.25 1987 $4.74 $4.55 $4.77 $4.85 $4.71 1988 $7.48 $7.02 $6.16 $6.62 $7.69 1989 $5.18 $6.24 $6.47 $6.44 $6.13 1990 $5.64 $5.71 $5.62 $5.78 $5.66 1991 $5.05 $5.38 $5.42 $5.56 $5.43 1992 $5.01 $5.48 $5.35 $5.53 $5.28 1993 $5.73 $5.68 $5.66 $5.59 $5.58 1994 $4.96 $5.53 $5.36 $5.56 $5.35 1995 $5.90 $5.51 $5.69 $5.50 $5.43 1996 $6.60 $6.93 $6.52 $7.10 $7.03 1997 $6.57 $6.35 $6.32 $6.56 $6.25 1998 $5.07 $5.55 $6.15 $5.58 $5.32 1999 $4.39 $4.41 $4.64 $4.39 $4.39 2000 $4.23 $4.65 $4.44 $4.94 $4.61 2001 $3.87 $4.12 $3.87 $3.87 $3.87 2002 $5.09 $4.53 $5.11 $5.09 $5.09 2003 $7.01 $5.60 $6.18 $5.65 $5.79 2004 $4.73 $6.07 $5.74 $6.63 $6.11

1980-2004 average $5.54 $5.64 $5.69 $5.72 $5.69 Worst Price? 14 3 5 4 6

Better than Barney NA 16 15 14 14

Remember – 25% of Justin, Terry and Peter’s price is the harvest price, as is 30% of Grandma’s price.


Celebrity Results Soybeans, 1980-2004

Barney

Average 5.54

WorstPrice * 14


NA* Out of 25 years

Let’s compare to Barney Binless!



Barney Grandma

Average 5.54 5.64

WorstPrice * 14 3


NA 16* Out of 25 years

Barney vs. Grandma

• Grandma found the dime!


• Slow but steady adds value!



Barney Grandma Justin

Average 5.54 5.64 5.69

WorstPrice * 14 3 5


NA 16 15* Out of 25 years

Barney vs. Justin • Justin found 15 cents!


• Price targets work!



Barney Grandma Justin Terry

Average 5.54 5.64 5.69 5.72

WorstPrice * 14 3 5 4


NA 16 15 14* Out of 25 years

Barney vs. Terry

• Terry found 18 cents!


• Timed selling works too!



Barney Grandma Justin Terry Peter

Average 5.54 5.64 5.69 5.72 5.69



NA 16 15 14 14* Out of 25 years

Barney vs. Peter

• Even Peter found 15 cents!


• Options cost him 3 cents



Barney Grandma Justin Terry Peter

Average 5.54 5.64 5.69 5.72 5.69



NA 16 15 14 14* Out of 25 years


What can we conclude from our celebrity search for a pre-harvest advantage?Everybody with a plan found the dime, and everybody with a plan beat the harvest price, so…

Have a plan!


Can we improve their

pre-harvest marketing

plans?


Grandma has a plan. How could we improve it?

Simple is nice, but does it make sense to price grain at less than my loan rate? Grandma needs a minimum price objective.


Getting your price is great, but what about those years when the market offers good, but not great, prices? Justin needs to mix in some decision dates.

Justin has a plan. How could we improve it?


Seasonal price trends are interesting, but does it make sense to forego earlier or later sales at any price? Terry needs to mix in some price objectives too.

Terry has a plan. How could we improve it?


Comparing Peter’s results to Terry shows that, in the long run, options cost money. Peter profited from options in 3 of 19 years in corn, 4 of 21 years in soybeans, and , 2 of 12 years in wheat. But options can be used to get us to 100% sold!

Peter has a plan. How could we improve it?


Objective: Buy crop insurance to protect my production risk, and have 75% of my anticipated corn crop (based on APH yield) priced by late May.

Price 10,000 bushels at $2.10 cash price ($2.50 Dec. futures) using forward contract/futures hedge/futures fixed contract. HTA 1-3-06 @ $2.51½ Dec’06 Price 10,000 bushels at $2.22c/2.62f, or by March 29, pricing tool tbd.Price 10,000 bushels at $2.34c/2.74f, or by April 7, pricing tool tbd. Price 15,000 bushels at $2.46c/2.86f, or by April 27, pricing tool tbd. Price 10,000 bushels at $2.58c/2.98f, or by May 13, pricing tool tbd. Price 10,000 bushels at $2.70c/3.10f, or by May 27, pricing tool tbd.

Plan starts on November 1, 2005. Earlier sales will be made at a 15 cent premium to price targets noted above.Ignore decision dates and make no sale if prices are lower than $2.10 local cash price/$2.50 December futures. I will “revisit” my minimum price in February, 2006. Exit all options positions by mid-September.

Corn 2006 Pre-Harvest Marketing Plan

http://www.cffm.umn.edu/Marketing/MarketingPlans.asp


Objective: Buy crop insurance to protect my production risk, and have 75% of my anticipated corn crop (based on APH yield) priced by late May.

Price 2,500 bushels at $5.15 cash price ($5.65 Nov. futures) using some form of fixed price contract: forward contract, HTA, sell futures. HTA 4-15 @ $5.92½ Nov’06 Price 2,500 bushels at $5.35c/5.85f, or by Mar 15, HTA 6-21 @ $6.45 Nov’06Price 2,500 bushels at $5.55c/6.05f, or by Mar 29, HTA 6-21 @ $6.45 Nov’06 Price 2,500 bushels at $5.75c/6.25f, or by Apr 7, HTA 12-20 @ $6.38¼ Nov’06 Price 2,500 bushels at $5.95c/6.45f, or by Apr 27, HTA 1-3 @ $6.45¼ Nov’06 Price 2,500 bushels at $6.15c/6.65f, or by May 13, pricing tool tbd.Price 2,500 bushels at $6.35c/6.85f, or by May 27, pricing tool tbd.

Plan starts on October 1, 2005. Earlier sales will be made at a 15 cent premium to price targets noted above.Ignore decision dates and make no sale if prices are lower than $5.15 local cash price/$5.65 November futures.Exit all options positions by mid-September.

Soybeans 2006 Pre-Harvest Marketing Plan

50% of my 2006 crop has been priced at $6.33 November futures.


Three reasons to like pre-harvest sales

1. Strong seasonal tendency2. LDP’s give me upside

potential in a down market3. The sale is made at a price

that works for me!


I have a pre-harvest marketing plan.

Do you have a plan?


Objective: Buy crop insurance to protect my production risk, and have ___% of my insured (APH) corn crop priced by __________.

Price ______ bushels at $______ cash price ($_______ Dec. futures) using ___________.

Price ______ bushels at $______, or by _______, using __________________________.


Price ______ bushels at $______, or by _______, using __________________________. Price ______ bushels at $______, or by _______, using __________________________.


Plan starts on __________________. Earlier sales will be made at a _________ cent premium to price targets noted above.Ignore decision dates and make no sale if prices are lower than $_________ local cash price/$_________ December futures.

Corn My 2006 Pre-Harvest Marketing

Plan


Objective: Buy crop insurance to protect my production risk, and have ___% of my insured (APH) soybean crop priced by _________.

Price ______ bushels at $______ cash price ($_______ Nov. futures) using ___________.



Price ______ bushels at $______, or by _______, using __________________________. Price ______ bushels at $______, or by _______, using __________________________.


Plan starts on __________________. Earlier sales will be made at a _________ cent premium to price targets noted above.Ignore decision dates and make no sale if prices are lower than $_________ local cash price/$_________ November futures.

Soybeans My 2006 Pre-Harvest Marketing

Plan


Who is our unknown celebrity?


Hank Holder!

While our other celebrities are searching for an advantage in pre-harvest pricing, Hank is still holding onto last year’s crop. But the seasonal trends that favor pre-harvest sales are working against the value of old crop grain in the bin. In addition, the old crop basis has begun it’s decline from late spring highs to harvest lows.


Worthington, MN Average Cash Corn Prices, 1980-2003 Crop Years

$2.00

$2.05

$2.10

$2.15

$2.20

$2.25

$2.30

$2.35

$2.40

approximate dates (October 1 - September 30)

$ pe

r bus

hel

ON

JD

A

M

F

J

JM

SA

The 11th Commandment of grain marketing: “Thou shall not hold unpriced corn or soybeans in the bin beyond July 1”


Contract

July 1-7 Oct 12-18

Change

1980 $2.38 $2.74 $0.36

1981$2.90 $2.25 ($0.65

)

1982$2.30 $1.83 ($0.47

)

1983 $2.90 $2.93 $0.03

1984$3.13 $2.54 ($0.59

)

1985$2.40 $2.10 ($0.30

)

1986$1.85 $1.20 ($0.65

)

1987$1.47 $1.35 ($0.12

)

1988$2.86 $2.45 ($0.41

)

1989$2.42 $1.97 ($0.45

)

1990$2.55 $1.88 ($0.67

)

1991$2.03 $2.02 ($0.01

)

1992$2.18 $1.79 ($0.39

)

1993 $2.08 $2.13 $0.05

1994$2.04 $1.76 ($0.28

)

1995 $2.51 $2.71 $0.20

1996$4.80 $2.59 ($2.21

)

1997 $2.06 $2.38 $0.32

1998$2.00 $1.76 ($0.24

)

1999$1.50 $1.42 ($0.08

)

2000 $1.48 $1.63 $0.15

2001 $1.59 $1.60 $0.01

2002 $2.01 $2.33 $0.32

2003$2.05 $1.90 ($0.15

)

2004$2.43 $1.73 ($0.70

)

Average $2.31 $2.04 ($0.28)

Worthington, MN Cash Corn, 1980-200417 years (68%) the market declined

Of the 8 years (32%) where the market improved, only 5 years did the price rise more than 15 cents!


Contract

July 1-7 Oct 12-18

Change

1980 $2.38 $2.74 $0.36

1981$2.90 $2.25 ($0.65

)

1982$2.30 $1.83 ($0.47

)

1983 $2.90 $2.93 $0.03

1984$3.13 $2.54 ($0.59

)

1985$2.40 $2.10 ($0.30

)

1986$1.85 $1.20 ($0.65

)

1987$1.47 $1.35 ($0.12

)

1988$2.86 $2.45 ($0.41

)

1989$2.42 $1.97 ($0.45

)

1990$2.55 $1.88 ($0.67

)

1991$2.03 $2.02 ($0.01

)

1992$2.18 $1.79 ($0.39

)

1993 $2.08 $2.13 $0.05

1994$2.04 $1.76 ($0.28

)

1995 $2.51 $2.71 $0.20

1996$4.80 $2.59 ($2.21

)

1997 $2.06 $2.38 $0.32

1998$2.00 $1.76 ($0.24

)

1999$1.50 $1.42 ($0.08

)

2000 $1.48 $1.63 $0.15

2001 $1.59 $1.60 $0.01

2002 $2.01 $2.33 $0.32

2003$2.05 $1.90 ($0.15

)

2004$2.43 $1.73 ($0.70

)

Average $2.31 $2.04 ($0.28)

Worthington, MN Cash Corn, 1980-200417 years (68%) the market declined

Of the 8 years (32%) where the market improved, only 5 years did the price rise more than 15 cents!


cash price = futures price + basis- 28 cents - 12 cents - 16 cents

Two separate and potent price trends are stacking the deck against Hank. Despite some exceptions, his odds for success are small.

1980-2004 average, from the 1st week of July to the 2nd week of October…


cash price = futures price + basis- 47 cents - 9 cents - 38 cents

Soybeans are even a greater challenge!

1980-2004 average, from the 1st week of July to the 2nd week of October…


The conclusion for Hank is clear…Worthington, MN Average Cash Corn Prices, 1980-2003 Crop Years

$2.00

$2.05

$2.10

$2.15

$2.20

$2.25

$2.30

$2.35

$2.40

approximate dates (October 1 - September 30)

$ pe

r bus

hel

ON

JD

A

M

F

J

JM

SA

Hank is riding the wrong bus!


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Final Thoughts• There is no one “right” answer in pre-

harvest marketing and some degree of risk is unavoidable

• Being just Grandma, or just Terry, or just Justin may not be the right approach

• Diversifying your choices will decrease risk• Everybody with a plan beat Barney. Do

you have a pre-harvest marketing plan?

Documents

Celebrity Squares Search for a Pre-Harvest Advantage