SD farmers look at marketing options at Growing On
YANKTON, S.D. — South Dakota farmers who wanted direction in marketing another year of bumper crops received some expert advice at the Growing On meeting series, which made a stop in Yankton on Dec. 1.
Iowa State University Farm and Ag Business Management Specialist Steven Johnson has been leading the workshops for the last 15 years. He says in that time he's never seen as much on-ground storage of corn in bags or in piles at elevators in the region.
He anticipates the big 2017 corn crop and a record 2.5-billion-bushel carryout will keep the market sideways unless there is a major weather scare in South America.
"I think it's going to be a long fall and winter to price corn, maybe 10 to 15 cent improvement in futures and maybe 5-cent to 10-cent basis appreciation," Johnson says. So, that will make marketing a challenge.
Johnson sees some opportunities for better cash prices yet in December as processors need corn, but they will be shallow pops.
"There could be some quick-ship bids that are coming here around Christmas and New Year's, as the processors need to have seven days of corn delivered in about four because of those long weekends," he says. "So, I have a lot of farmers that are in tune with basis that are trying to pick up another nickel or a dime around Christmas and New Year's."
Johnson stresses that farmers need to reward rallies in the corn market and make sales before they need cash flow.
"I think a farmer needs to separate basis from futures, probably lock basis now and deliver bushels over the next six weeks," he says. That's because he thinks after the first of the year, the basis will widen out and pressure the cash market as farmers sell corn to meet cash flow needs. He says the best basis will actually come in April or May when farmers are in the field, but some may not be able to wait that long to market their crop or want to pay storage that entire time.
When farmers compare breakeven costs for corn and soybeans, the latter easily wins out. Johnson calculated an estimated breakeven for corn in South Dakota at $3.42, compared to soybeans at $9.06. "There's going to be more profitability in marketing old crop soybeans than there is in marketing old crop corn," Johnson says.
He says farmers who have soybeans to sell need to be looking at the crush market as margins for processors are very strong right now.
"We've already seen some basis appreciation especially around the soybean crushers," he says.
Ag lenders say, with limited profit potential in corn, they're trying to help producers understand their cost of production.
"When they're making these marketing decisions on how they're trying to market these bushels, they know what is a profitable marketing decisions verses 'I'm just selling grain.'" says Wes Chambers, Regional Vice President with Farm Credit Services says.
Chambers says they also want to help producers manage their cash flow needs so they aren't forced to market grain.
"You just don't want to be dumping grain on the market at a low time to meet bills. If there's some other options we can consider then that's what we need to be looking at," he says.
Farmers attending the Growing On meetings admit grain marketing has been a challenge in the low-price environment, and they are looking for answers.
"We are some of the best producers in the world, and we just produce too much, which causes the supply to be in abundance and the price is low. So, now we have to figure out how we're going to work within the pricing system," says Centerville farmer Richard Vasgaard.
He admits corn marketing has been frustrating and that trend may continue.
"I was thinking maybe this year might be the bottom or the low year, but the way it sounded, we might have another year we have to go through this," Vasgaard says.
The Growing On 2018 meeting series was held at several locations throughout South Dakota and was sponsored by Farm Credit Services and South Dakota Corn.