Expert: Use Cost Containment, Patience In Marketing This Fall’s Crop

Statewide Iowa — As harvest approaches, experts are urging Iowa farmers to watch their costs and be patient as they face a difficult market for corn and soybeans.

Chad Hart, associate professor of economics at Iowa State University, says that this marketing year, like many of the previous years, will challenge producers’ patience and financial standing. He says it will take some time for prices to recover and we may not yet have seen the low. But time is still on our side if we can position ourselves to ride out the next few months. Seasonal patterns and the current futures prices both suggest better prices will be available in the spring, according to Hart.

He says that in the meantime farmers need to control costs as best they can, be patient and utilize marketing strategies to take advantage of price rallies. Many farmers use storage as it achieves two of these three objectives, but it makes sense this year also to re-examine their approaches to crop marketing and storage.

Hart says that storage is never free; there are always interest and opportunity costs. He says each year farmers should evaluate the relative benefits of owning the crop physically versus re-owning the crop, either by futures and/or call options.

Prices for grain were about breakeven when the year started and improved until trade tariffs started to be enforced and crop ratings exceeded expectations, driving projected returns into negative territory. Hart said some recovery has occurred and could resume, as the trade markets shift — such as increasing crop shipments to North Africa.

Hart says that for those farmers who took advantage of this spring’s marketing opportunities, that was a good move on their part. He says those sales look exceptional now and they should make the rest of the year easier to get through. Looking forward, the keys to marketing this year are roughly the same as the ones for the previous few years since we have once again returned to negative margin projections.

After the release of the August U.S. Department of Agriculture reports, projected Iowa corn returns were hovering just below breakeven, while soybean returns remain well below zero. Both crops face large potential supplies, but soybeans are much more vulnerable to the trade tensions.

Hart says that any recovery will likely look like the past couple of months — two steps forward, followed by one step back — as the harvest plays out and trade routes readjust to the new pricing and tariff environment.

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