|
SC Iowa | Well, dirtpour, I know just enough from the information you provided to be dangerous, but I'll take a stab..
Here is what I think I know:
Eastern Kansas had an excellent corn crop, and your yields were good
You have corn sold on price later with a feeder.
Neither of those items above inspires me to think basis is going to rocket higher....if the price later corn is to a cattle feeder, he is going to have access to lots of lower quality corn in next 6 months and the sheer volume of that high yieldiing E Kansas crop may prevent rapid basis appreciation, especially if farm-stored corn has to move for quality reasons this spring...
Now, about that phrase "I don't have a need to turn it into cash anytime soon"......what does that mean?? You have inputs bought and have no big cash flow needs until fall, OR you will have bills to pay in late May or June from spring season?? To be honest, not "needing" money can be detrimental to a successful marketing plan because you can wait, wait, wait.....
Now, you had an interesting price target at 4.30 on the March....where did that come from?? Most of the things I was watching were based on taking out and closing above 4.25 on the March...just wondering because, to me, if we had closed on March at 4.30 I would have thought we were off to the races higher....
Anyway---what to do?? My mantra going into the report was for folks to be 75% sold on old crop and 25% sold on new crop, so it's certainly not a sin to be holding unpriced old crop corn, just maybe not as much as you indicate, and the country is full of folks in your position, too...
I'm a bit worried about that corn with the feeder....you mentioned he may not want to wait until spring/summer to price it....what kind of firm agreement do you have with this outfit?? Do you price basis off what he says he willing to pay on a given day or benchmark against several other markets?? Like I said, if it's a cattle feeder, I don't see where his corn basis is going to be red hot unless you've got some sidebar deal going on....so that would be the first corn I would think about pricing out.....and it will generate some cash for whenever you need it..
Now, let's talk about that good quality farm stored corn......your ace is being able to hang on until planting season or early summer.....I don't know your market structure, but I am seeing 25-30 cent cash carries into May/June in eastern Iowa processor market....that's a nice healthy return of 5-6 cents per month......so the market IS paying a premium for good quality corn, it's just being expressed in the carries today if you can wait several months..
You are probably not ready to give up just yet, so the trick is how to hold value or help earn your way out of the recent break......so let's break your corn position up into 25% increments...
The first 25%---assuming it's with that feeder....sell it next week
Second 25%----get it hedged in July futures
Third 25%----Sell 4.10 July corn calls at 25 cents against that portion
Fouth 25%----leave open, but if March futures break below 3.50, give serious consideration to getting it hedged up......
There, a little something for everyone strategy, especially for those not wanting to give up and get out after this sharp break..
Ray J
| |
|
corn- panic or hold
