One of the biggest challenges in marketing grain during the spring and summer of 2015 is the gap between the producer’s expectations and the reality of what the market is capable of achieving. Twelve months ago, when farmers were planting their soybeans in the spring of 2014, there was a lot of optimism about selling that crop for value in the $13 or $14 per bushel range coming out of storage in the winter or spring of 2015.
When the Titanic set out on her maiden voyage from Southampton England to New York City, there were a lot of passengers looking forward to the experience that they were going to have in enjoying their first class fare across the Atlantic. When the first of the lifeboats were lowered into the North Atlantic after the Titanic hit an iceberg, there were actually passengers who refused to board them because they didn’t really believe that the ship was going down. Ultimately, those who refused to acknowledge the extent of the catastrophe ended up going down with the ship.
The good ship Soybean Prices, left port last spring with reasonable potential, but upon encountering a record North American crop, followed by a record South American crop, followed by another massive planting intention for 2015, the vessel is severely damaged. A full tripling of soybean ending stocks from 145mbu to 410mbu is more than the high prices could withstand. Any attempt to ride out the old crop soybeans prices waiting for a rally is akin to standing on the deck waiting for the Titanic to bob back up to the surface.
The good news is that the overwhelming majority of Canadian soybean growers went into the harvest of 2014 with an aggressive book of sales, and continued to market their soybeans right into the winter. These solid commitments to forward marketing have enabled most farmers to avoid the full impact of the world’s current oilseed supply situation.
While corn prices have not dropped as far as soybeans in the past five months, they have also failed to find a sustainable reason to rally. Cash prices for corn in Ontario in mid-April aren’t radically different than they were in mid-November. The issue in corn values is essentially the same as the problem with soybeans, the market is held down by the burdensome weight of record supplies. While corn carry out is not going to triple between 2014 and 2015, this year’s ending stocks are going to be a record large volume. Likely between 1.7 and 1.9 billion bushels.
The marketing strategy at this point is pretty simple. Producers who are holding on to old crop unpriced grain need to get pretty serious about shipping their expectations in line with what the market is capable of achieving. Much like the passengers on the deck of the Titanic, it’s no longer about your entitlements from the first class fare; it’s about evacuating the market before you ride it any lower. In both the old crop and new crop marketing decisions, the rule is that over-supplied markets pay carries. This means that the further out the calendar one is prepared to sell, the higher the price will be. (August sales are at a higher price than April sales). The best pricing opportunities are going to develop in the furthest out time slots.