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On October 28, 2017

Extension Marketing Specialist John Berry shares these thoughts on the marketing challenge facing most grain producers. Some have bushels committed to buyers. Some have access to storage. The topic for today is – “What can I do with the bushels not yet priced?”

Berry reminds readers that he is looking at this from his market perspective in south eastern Pennsylvania. If you read this, please, remember to adjust these thoughts for your local market especially being careful with your expected local basis movements throughout the year.

Berry’s bias is that our individual cost-of-production has no impact on deciding to market a crop once it is harvested. There is nothing we can do to change the market. There is nothing we can do to shift production to another enterprise. We are stuck with the crop and can only deal with what the market does, and the market does not care. Berry will talk all day long during the pre-planting season about knowing your COP. This is not the time for that consideration. We have to work with what we are offered.

There are only three things we can do with uncommitted bushels at harvest; 1) sell off the combine, 2) put in storage un-priced, and 3) put in storage priced for later delivery. The challenges center on deciding which of these methods is most appropriate. Nothing is 100%. Nobody on earth can predict the future. Things change. However, we can look at what the market is telling us today and get a feel for how to market some of our 2017 crop. A key concept at this time of year is “carry.”

Carry is the price difference between a nearby contract month and another contract month. As an example only: December corn is 350 and July is 379. This makes the carry $0.29. We must be careful and remember that carry is a bid by the market to pay you for storage. It is not a prediction of what the price will be in the future. To get the carry you must sell it.

In our above example: to get the $0.29, you must price the corn today for delivery against the July contract. This is where it gets complicated. You may use either cash or futures contracts. If you want the futures carry, you can either sell futures directly or sell a hedge-to-arrive (HTA) contract that leaves the basis unpriced. You can also use a cash forward contract for July delivery. Remember to account for your expected local basis movement. You do not always have to hold the cash grain until July. If you sold futures, you can deliver the corn and terminate the strategy any time the basis meets your expectations. If you sell a cash forward contract or HTA, you will probably not be allowed to deliver until the date on the contract. The only reason that you would sell the carry is to make a profit from storing grain. If you follow this strategy you have put priced grain in storage for later delivery.

If we have no storage, selling off the combine is the standard marketing strategy. This strategy also makes sense under some market conditions even if we do have adequate on-farm storage. Corn looks to be asking us to store the crop priced for later delivery this year. Soybeans may be a different story? The carry with beans is relatively small so not much of a payment to the storage enterprise. To decide whether to store or sell we must now decide if the futures price is “high”.

If we believe today’s futures price is “high” – the market wants us to sell at harvest. If we believe today’s futures price is not “high” the market wants us to put our beans in the bin un-priced.

When we have un-priced grain in storage price risk is still with us. Of course, we put the crop in the bin un-priced because we are convinced prices will increase. Two things concern Berry about this; 1) prices may not increase, and 2) in many cases, when prices do increase we still do not market bushels.

If we have un-priced grain in storage; Berry is asking you two questions right now: 1) what price are you waiting for? and 2) how long are you willing to wait?

If you are interested in enhancing your understanding of markets and market strategies? You may want to put a few dates on your calendar and consider tuning in to a series of monthly video conferences. Extension will be reviewing these topics at 7:00pm on the first Tuesday of December through April. Addition details will be announced later.

To Complete Grower Food Safety Training

The Food Safety Modernization Act (FSMA) Produce Safety Rule in §112.22(c) requires that at least one supervisor or responsible party from the farm successfully complete food safety training at least equivalent to that received under a standardized curriculum recognized as adequate by the Food and Drug Administration. This one-day training course, developed by the Produce Safety Alliance (PSA), is intended for those who grow produce covered under the Produce Safety Rule, work with wholesale buyers that require this course as a condition of sale, or are just interested in learning about produce safety.
To learn more about the FSMA Produce Safety Rule and find out if your produce growing operation is covered under the regulation, visit extension.psu.edu/fsma .

Approximately seven hours of instruction time will be spent on the following modules:
Introduction to Produce Safety, Worker Health, Hygiene, and Training, Soil Amendments, Wildlife, Domesticated Animals, and Land Use, Agricultural Water (Part I: Production Water; Part II: Postharvest Water), Postharvest Handling and Sanitation, and How to Develop a Farm Food Safety Plan

After attending the entire course, participants will be eligible to receive a certificate from the Association of Food and Drug Officials verifying that they have completed the training. To receive a certificate, participants must be present for the entire training and submit the appropriate paperwork to their trainer at the end of the course.
Cost and registration: $20 per participant.* To register, go to extension.psu.edu/fsma-grower-training. Funding for this training was provided through the Pennsylvania Department of Agriculture. Registration cost is $150 with a $130 discount for Pennsylvania residents; one registration per farm.

This training will be held on the following dates and locations: November 3 – Bedford County, December 5 – Erie County, December 13 – Columbia County, January 18 – Berks County, January 29 – Mid-Atlantic Fruit and Vegetable Convention at Hershey, February 13 – Westmoreland County, February 13 – Philadelphia County, February 20 – Lehigh County, February 28 – Lancaster County, March 6 – Centre County, and March 8 – Adams County.
See more information on locations here: http://files.constantcontact.com/d14163a6301/93d2717c-3dd6-493e-af5e-3b42a0c064c8.pdf

To Welcome Anna Busch to the Crops Team in Union County

Penn State Extension is excited to welcome Anna Busch to our team of field professionals. Anna comes to us with a passion for her work and a genuine interest in helping producers succeed. While growing up in rural Michigan, Anna enjoyed gardening and raising a few chickens in her parent’s backyard, which sparked her curiosity in agriculture. She attended Michigan State University, earning a B.S. in plant biology and worked as an undergraduate research assistant studying insect vectored plant viruses in biofuel crops. Anna was recruited to graduate school at Penn State where she was able to combine her interests in agriculture and insects in John Tooker’s lab. In 2016, she completed a M.S. in entomology, evaluating pest management strategies in no-till dairy cropping systems. After graduate school, Anna worked as a research assistant for the Potato Outreach Program at Michigan State, where she helped coordinate and conduct on-farm potato variety trials across the state.

Anna is looking forward to working with producers and industry in east-central Pennsylvania. She is based out of the Mifflinburg office and covers Columbia, Montour, Northumberland, Snyder, and Union Counties. Anna can be reached by phone at 570-556-4756 or email akb226@psu.edu

Quote Of The Week: “Be more concerned with your character than with your reputation. Your character is what you really are while your reputation is merely what others think you are.” Dale Carnegie