Marketing Roadmap for 2009
Several factors to keep an eye on and trigger prices to watch.
Arlan Suderman
Published: Feb 19, 2009
Wall Street's collapse last fall changed the dynamics of the grain and oilseed markets, pulling more than $40 billion of fund investment from the pits. Prices began to recover this winter before economic worries returned to pressure prices of late. With spring planting decisions rising to the forefront, producers are reviewing their marketing trigger points for the months ahead.
Here are several of the keys that I think see as important as we go forward.
Spot corn futures are probably well-valued between $3.50 and $4, but the money flow could easily drive it up to another 50 cents either way outside of that range on chart signals alone if prices break outside that range. The greatest danger short-term is a break to the downside, but that could be devastating to hopes of getting enough acres this year.
Two factors to watch:
1. March 31 Planting Intentions Report
2. Weather
Demand should strengthen through the last half of the marketing year, but old-crop stocks are more than adequate as long we get enough acres for the coming growing season. Failure to get those acres would necessitate rationing this year's demand to further increase the carryover into next year. Due to the already-large carryover, we only need 85 million acres planted; assuming a trend yield. Prices will probably trend lower into the summer if we get 88 million acres, but we may face a greater danger of getting something closer to 80 million, which would likely be a shocker to the trade.
Soybeans are assumed to have more than enough acres, but the margin for error is a bit smaller now since drought has robbed so many bushels in South America. As such, soybeans can't give up too many acres without putting their balance sheet at risk as well.
I'm not a big fan of carrying old-crop inventory into the summer, but I'm most concerned about soybeans. I will encourage new-crop pricing whenever the market is attractive, but see an overall better environment in 2010, so I'm less concerned about new-crop bushels if I don't get large quantities pre-sold.
Price triggers for remaining old-crop:
$4.00 $4.25 $4.50 $4.75 $5.00 for corn
$10.00 $10.40 $11.00 $11.50 $12.00 for soybeans
Date triggers:
Recent years have seen a spike into February 28 as revenue insurance guarantees are set.
March 31 Planting Intentions Survey Results will determine potential spring rally to readjust acreages.
Consider dividing old-crop bushels around these price and date triggers with the objective of being sold by the end of April, depending on results of USDA's March 31 USDA planting intentions survey report.
Price triggers for New-Crop:
$4.50 $5.00 $5.50 $6.00 for corn
$10.00 $10.50 $11.00 $12.00 for soybeans.
I would consider pricing 15% at each increment unless planting intentions data is surprisingly bullish for corn/bearish for soybeans.
Date triggers:
March 31 Planting Intentions Report
May 31 - Planting Progress.
My primary objective is to have enough new-crop forward priced to meet fall cash flow obligations, but believe next year's fundamentals should be stronger. As such, I'm not as worried about having to leave more pricing into early 2010 if the market doesn't give me what I'm looking for this spring on new-crop bushels.
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Tagged: soybeans, usda, planting intentions report, insurance, Drought
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