Mastering the grain markets is a constant battle for many farmers each year. From trying to sell at the highs or aiming to beat the lows in the market, knowing when to market grain can be a frustrating piece to the farming puzzle. However, University of Minnesota’s Edward Usset says marketing grain is simple, it’s just not easy. He says the biggest mistake is storing grain too long, especially in the northern Corn Belt.
“One of the mistakes I talked about is simply holding grain in storage too long,” said Usset at the Top Producer Summit in Chicago this week. “I put a very bright line on July 1. Early July is the time when old crop grain should be sold– or at least priced. If it’s held, it’s a big mistake.”
Usset thinks while the mistakes of marketing grain differ from region to region, market patterns are fairy uniform.
“If you look at market patterns, cash price patterns, there’s a very strong tendency for cash prices to fall from planting to harvest,” he said.
From his years studying the markets, Usset says there are two main factors that drive the cash price: futures and basis.
“Basis tends to decline from summer to harvest,” he said. “You have to get to those harvest lows. It happens different every year.”
He said as for futures, there are also seasonal trends that can impact marketing.
“There is a very strong tendency, particularly in the corn market, for new crop futures to go lower from the spring to harvest,” he said. “So, both pieces of the cash price have a strong tendency to go lower.”
2019 was a unique year. From concerns of not being able to fill forward contracts, to a weather rally that lasted through July, Usset said his biggest advice for producers is to forget last year.
“The clearest thing in our mind is last year,” he said. “We’re trying to correct what we did last year. In fact, I’ll tell people that the three most important words and marketing are “forget last year”. I don’t know what 2020 will be like, but it won’t be 2019. It might have elements of it, but it’ll be its own set of things that will happen”
Usset published a book called “Grain Marketing is Simple, It’s Just Not Easy.” He said when he talks to farmers across the country, he hopes they each look in the mirror and ask themselves if Usset’s list of grain marketing mistakes are happening on their farm. He said if the answer is yes, eliminate that mistake.
