Barring adverse growing conditions in late summer, farmers should have moved old-crop corn before basis widened and futures prices declined. As farmers in the northern three-fourths of Iowa look to harvest another large corn crop, old- and new-crop marketing strategies and grain storage decisions come into play.
By having already delivered old-crop corn bushels, farmers likely captured the better spring basis and avoided accruing additional storage costs. Farmers could still have benefitted from the summer futures price rally using basis or minimum price contracts offered by most grain merchandisers.
USDA’s August 12 Crop Production Report will provide the first in-field yield estimates for corn and soybeans combined with producer surveys. Expect the report to confirm the size and availability of the 2015 corn crop.
The potential soybean yield will still be inconclusive, however. USDA will include a resurvey of soybean planted acreage in Arkansas, Kansas and Missouri in the August 12 report. Soybean futures price volatility could continue until more is known about US planted acres and potential yields.
So should you continue to reward the market by making old- and new-crop sales? Despite uncertain 2015 crop supplies, significant rallies in corn and soybean futures prices face stiff headwinds. The high US dollar value index should continue to limit 2015 exports. In addition, low crude oil prices will keep ethanol margins tight.
Lessons were learned from the summer weather rallies that occurred in both 2011 and 2012. Producers should have kept selling both old- and new-crop bushels during the summer months. In both of those years, December corn futures prices were highest in August and moved lower by harvest. November soybean futures were at their highs in late August of 2011 and early September 2012, before a sharp selloff prior to harvest occurred in both years.
Expect on-farm storage space to be tight this fall, especially where farmers are still holding old-crop bushels in late August. Commercial storage space should be adequate for at least the first half of the 2015 corn harvest.
Iowa farmers usually commit 20 percent to 30 percent of new-crop bushels to delivery prior to harvest. Farmers with new-crop hedge-to-arrive (HTA) contracts planning on harvest delivery should have already locked in that basis.
The underlying concern is nearly 1.8 billion bushels of old-crop corn nationwide will still be in storage in late August when the 2014-15 marketing year ends. That’s based on the July 10 USDA World Agricultural Supply and Demand Estimates (WASDE) report.
As the 2015 harvest begins, most all of the old-crop corn will be owned by farmers and stored in on-farm facilities or stored commercially with bushels under warehouse receipt. Sizable old-crop stocks compound the concern for having adequate storage space as the 2015 harvest wraps up.
Hopefully you’ve already developed and implemented your old- and new-crop corn marketing plans. It’s possible we could see the "perfect harvest storm." That would include lower corn and soybean futures prices well off their summer highs, wider-than-normal basis just prior to and during harvest and a 2015 corn crop that matures late and becomes difficult to handle, dry and store.
The ISU Extension and Outreach Ag Decision Maker website has two recently updated Information Files and Decision Tools (Excel spreadsheets) to help farmers with grain drying and shrink strategies.