Sell or store? While fussing with the weather and drying what little corn and beans have been harvested, there is ample time to update your marketing plan. Do you store, and if so, what price will pull it out of the bin. Or do you unload your grain now to take advantage of current harvest premiums for corn as well as beans at the top of the USDA price range? To help make those decisions, let’s explore the current market dynamics.

One of the most significant market dynamics is the delay in getting crops harvested. Futures prices have frequently responded to those delays and basis levels have improved as a direct result says IL marketing specialist Darrel Good in his weekly newsletter. But he agrees with you that continued delays could translate into lower yields from crop deterioration and harvest losses.

Good says prices will be a function of demand for corn and beans and the market is currently trying to determine the extent of that demand. Important elements of that will be the speed, timing, and extent of the economic recovery here and abroad. He says when consumers have more money to spend the meat market will recover and that will imply the need for more feed. And he adds that stronger energy prices will pull ethanol higher, but commodity prices will soften if those events do not materialize.

Dynamics in the soybean market are lead by the pace of exports, which are well ahead of the 2009 record year. China is responsible for the increased business, but as South American production becomes available, the market will watch for US exports to slow. Domestic use of soybeans is at a low ebb, both in crush and consumption. While stocks are ample, the inventories at processing plants means some demand weakness.

Dynamics in the corn market have been helped by a robust economy for ethanol refiners with reasonable returns from higher oil prices and moderate corn prices. Corn exports are on pace with last year, which declined from prior years, although the USDA target is 2.15 bil. bu. Feed use of corn will be known when the December Grain Stocks report is released in early January. However, demand is known to be weak because of low livestock prices, declining livestock numbers, and increased production of distillers’ grains.

Darrel Good says there will still be price uncertainty in weeks to come, but the past several weeks of higher prices have allowed some flexibility to be aggressive in marketing at harvest time. That uncertainty is also identified by MO marketing specialist Melvin Brees in his latest marketing newsletter. But Brees believes there is a significant potential in a lower corn crop than what is currently being forecast. He cites the sluggish harvest rate but also the fact that freezing temperatures halted maturity for one-third of the corn crop, and that will result in lower test weights and poor stalk quality. The stronger market prices, which Brees calls a “counter-seasonal price rally” have been at work in both the corn and bean markets, particularly tightening up the soybean basis. Brees is not one to ignore current cash bids, saying many of them are in the upper range of the USDA’s estimated prices for the year.

The corn market still signals storage to Brees because of the nearly 20 cent spread from December to May futures. And he says when that is coupled with the expected tightening of the basis, there would be a return to storage that would be profitable. However, he warns that prices must be booked, and any unpriced corn going into storage is at risk for a decline in value if the crop remains as large as is now forecast and harvest progress picks up.

Brees says there are even profits to be made in cash sales at some locations paying nearly $4 per bushel. And he says it would be risky to hold onto the crop awaiting some definitive market signal that has indicated prices have topped. He suggests stored corn should be booked for spring delivery to lock in profitable prices and if the basis weakens as harvest progresses, Brees says a hedge to arrive contract would protect the futures portion of the price while awaiting post harvest basis improvement.

The bean market still signals sales rather than storage because there is only a 7 cent carry in the futures market from November to March, which will not pay for either commercial or on-farm storage. He says soybean storage is a speculative process of hoping prices rise above the USDA’s forecast price range. While he advocates a cash sale, he says at least lock in the strong basis with a basis contract if you believe the futures market will rise. While the market carry has increased from September, Brees interprets that as a signal that demand is beginning to weaken with the advent of the South American crop. He is opposed to carrying unpriced soybeans into the spring, and says anyone wanting to speculate in that direction should use either the futures market or call options, both of which still carry significant risks.

Summary:
The slow pace of harvest and uncertainties about crop size have provided counter-seasonal strength to corn and bean prices, along with other market dynamics. Strong ethanol demand, but moderate feed and export demand mark the corn market, which is telling farmers to store with a 20 cent carry through May 2010. Tight supplies, a strong export demand, and weaker domestic demand for soybeans are telling farmers not to store beans priced or unpriced.