Cash corn prices dipping below the cost of production are a big concern for producers who haven't forward contracted much corn. What to do?
It sounds as if some old crop corn has been moving in the country -- producers emptying bins ahead of harvest, and some who've just thrown in the towel and given up on getting a higher price any time soon. Bruce Hartley, owner of Hartley Grain Co. in central Indiana, said he had a truck sitting in line waiting to dump corn at a nearby Poet plant this morning.
It seems as if some producers forget about the downside risk -- they just hate to sell and then see the price go higher, he said. But crops in his area look good, although the lateness of the crop makes him think the real issue this fall won't be storage capacity, it'll be finding dryer capacity.
Some producers may be stuck leaving the crop in the field longer than they'd like, but of course that leaves them open to field losses. Hartley said he added a new dryer at the company this summer. Corn harvest in his area is at least a month away, he added.
As for soybeans, there aren't many left around his area, Hartley said -- but he said it looked as if basis might have plunged today. He'd just had a call from a processor that was cutting basis by 50 cents.
In Ralston, Iowa, Gerald McAfee, senior grain producer marketing specialist at West Central Coop agreed that producers with a lot of unpriced new crop corn face a difficult situation. "What can they do to get through this?
That's the question. One has to think there'll be some kind of rally," McAfee told me.
There are several options, he said. "We're looking at some call strategies, which locks basis in; there's also on-farm storage and the farm loan program. They can store grain at the elevator, too, but they will also have to pay storage. "They need to look at what fits their needs, but they need to keep the top end open," he said. After we get through harvest, especially for corn, if we hiccup on acres or weather it doesn't take long to reduce 2 bu carryover, because demand remains strong.
"If a producer has to get cash, it's important to keep the top end open, he said.
"We have a minimum price contract -- we take the cost of the call off the price of the grain, and we do offer puts and calls through the brokerage side of the company.
As far as storage is concerned, West Central Coop expanded both storage and unloading capacity at all three locations, McAfee said.
And he also noted a big drop in cash soybean basis today -- so maybe the opportunity to cash in on strong nearby demand is past.
