Minding Ag's Business

Corn Considerations for 2019

Katie Micik Dehlinger
By  Katie Micik Dehlinger , Farm Business Editor
Farmers may want to consider making some 2019 corn sales while the December 2019 futures contract is trading near $4 amid the possibility of higher corn acreage next year. (DTN Photo by Katie Dehlinger)

Farmers may be in the middle of harvesting their fall crops, but many are already thinking about next spring and what they are going to plant. If the picture for soybeans -- not just trade issues, but abundant supplies -- doesn't change significantly, farmers will turn to other crops. Corn is the most mentioned, but farmers are considering growing more barley, spring wheat, dry edible beans and other specialty crops to diversify and spread their market risk.

"There's an awful lot of folks that are suggesting that corn acres might rise next year because of the soft bean price," said CHS Hedging director of risk consulting services Kent Beadle. "Well, if you're going to make that decision, you may want to sell some $4 corn."

When Beadle and I spoke during the first week of October, the December 2019 corn futures contract traded around $4. Over the last 10 years, when supplies are plentiful and there's no need to ration demand, futures prices for corn have typically traded between $3 a bushel and $4.40 a bushel.

"We think that for most growers locking in $4 to $4.20 futures should allow at least some small amount of profitability," he said. It's not the type of profits farmers saw from 2012 to 2014, but at least they're making corn sales in the upper third of the market's historical trading range.

"And while we don't know what next year is going to bring -- we don't know if next year is the year where we're going to have a production issue, if next year is the year when prices are a lot higher because yields decide to fall below trend -- you have to have a plan. And starting to sell corn above $4 is always a reasonable part of a good marketing plan," he said.

DTN analyst Todd Hultman said that $4 corn on the futures board is a mirage for a lot of farmers because of the gap between that and the local cash price. But if your local elevator is offering $4 for delivery next "then you've got an opportunity," he said. It might be worth locking in 25% of your anticipated production.

Beadle said farmers need to take a good, hard look not only at what prices are being offered for the 2019 crop year but also at what input costs are doing.

"Fertilizer prices have surged upward fairly dramatically in the last few months," he said. According to retail fertilizer prices tracked by DTN, the average price of anhydrous is 25% higher than last year, averaging $493/ton. Corn production costs could increase this year for the first time infive years, according to several economist.

"So before you get all fired up that you're going to abandon all your soybean acres and that you're going to do nothing but plant corn, you want to think about those input costs," Beadle said. He also encourages farmers to think about whether they farm in an area that sees a yield drag in corn-on-corn production and include it in their breakeven math. He also said it'd be wise to do the math using a yield that's closer to trend line or your farm's APH history.

There is nothing normal about this marketing year. As farmers press forward with harvest season, more bushels of soybeans are heading into storage bins than at any time in recent memory. The DTN has been documenting the myriad issues surrounding China's 25% tariff in this week's series "Tariff Realities."

The first story, "Farmers Rely on Corn for Cash Flow as Soybeans Stuff Storage Space," discusses logistics issues forcing dramatic changes to the supply chain and farmers' storage decisions. You can find it here: https://www.dtnpf.com/…

The second story, "Storing Soybeans Requires Different Management," covers the nuts and bolts of keeping soybeans in condition while in the bin. It can be seen at https://www.dtnpf.com/…

The third story, "Diversification, Infrastructure Needed to Offset Potential Loss of Chinese Market," dives into how the tariffs are changing global trade flows. It can be found here: https://www.dtnpf.com/…

The fourth story, "Mind Your Marketing on Stored Soybeans," discusses how futures and options can help farmers minimize risk while capturing the carry offered in the soybean market. You can read it here: https://www.dtnpf.com/…

If you're not comfortable using futures and options, DTN Contributing Analyst Tregg Cronin reviews the types of cash contracts farmers can use to accomplish the same goals in our fifth story, "Trade War Changes Bean Storage, Pricing Plans." You can find it here: https://www.dtnpf.com/…

With soybean stockpiles expected to grow, experts are looking into expanding the use of soybeans in cattle feed. Russ Quinn covers some of the things you should consider first in the series' sixth story "Soybeans Could be a Cattle Feed Option." You can find it here: https://www.dtnpf.com/…

While most of the Tariff Realities series focused on struggles in the Northern Plains, the pinch is being felt all over the country. Mother Nature dealt farmers along the Lower Mississippi River in Arkansas, Louisiana and Mississippi a wet hand for harvest, and while the damage levels aren't unusual, the discounts certainly are. You can read the seventh story, "Soybean Discounts Skyrocket as Demand Slows the Flow of Beans Down the Mississippi River," here: https://www.dtnpf.com/…


Editor's note: This blog was originally published October 5 and was updated on October 11 to include links to additional stories.

Katie Dehlinger can be reached at Katie.dehlinger@dtn.com

Follow her on Twitter @KatieD_DTN

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