Posted on September, 20, 2024 at 10:29 am
“This is going to be embarrassing,” Brooks Cardinal says.
He then meets eyes with the woman asking how much of their 2024 crop is sold and replies, “For 2024, we have nothing. Nothing is sold.”
Cardinal Farms in Oaktown, Ind., is not alone. And Brooks and brother Brandon also have a lot of company in the grain marketing waiting room for the 2023 crop.
As of August, the Cardinals held less of their old crop than many of their fellow farmers. Storing roughly 15% of their grain on-farm, their bins were at about a third of the average level of their counterparts.
The Farm Futures August survey showed corn and soybean farmers were holding about half of their 2023 crop. Across the U.S., farmers held onto more grain in 2024 than they held the year before, according to USDA’s summer stocks report.
The 700-plus farmers who responded to Farm Futures’ August survey, on average, reported holding more than half of their 2023 crops in storage, either on or off the farm.
Having old crop still to sell as harvest looms is unusual for the Cardinals. Brandon, the primary marketer, had two things working against him: a high-yielding corn crop in 2023 and no summer rally of any note. So, the corn and soybeans stayed in the bins.
The advantage of on-farm storage, Brandon says, is efficiency at harvest and being able to dry down the grain. “We can dry for about half of what we’re charged for delivering wet grain,” he says.
Efficiency at harvest is a need farmers often cite. In addition to reducing drying costs, farmers can go full speed at harvest, when time is critical. Because the Cardinals turn their bins over several times at harvest, they plan to build more.
“Keeping everything efficient was No. 1 for this setup,” Brooks says, nodding toward their bins.
Once harvest is past, however, Brandon is intent on moving that crop to the end users. A nearby feed mill offers strong basis.
With a 30-year history growing watermelons, the Cardinals have the diversity needed to sustain cash flow, but they would rather not move profit from the cucurbits to support the grain operation.
Tom McKinney of Tipton, Ind., focuses his attention on his budgets. He carefully tracks production costs, so he knows when an opportunity arises to sell above his breakeven.
“And that’s how you get in the top third” of price opportunity, he says, adding that beating the funds or hitting in the top 10% is tough when you’re also growing the crop.
“Don’t beat yourself up,” he says. “You are doing well when you are steadily making a profit.”
And even better when you’re not paying storage costs or interest.
Ed Usset, grain marketing economist at the University of Minnesota, figures that cost into his analysis of seven different marketing styles.
The way to minimize that is to keep the length of storage to a minimum. That’s not a 2023 lesson; it’s a historical truth.
Usset’s celebrity producers market with a firmly cemented set of rules. Five of the seven have on-farm storage. Over 34 years of reality-based prices and production costs, the one with the highest price average in corn and soybeans is May Sellers. The worst is Hank Holder.
May and Hank use the most common of all postharvest marketing strategies — holding unpriced grain in storage. The difference in their style is timing. The difference in their success is significant.
Hank, who ends up selling some of his crop the week before harvest each year, owns the record for the lowest prices of the seven models in 16 of the 34 years of corn marketing and in 17 years with his soybeans.
That’s why Usset’s goal in a postharvest marketing plan is to sell the crop by July 1.
“I might write a preharvest plan a full year before harvest,” he says. “Postharvest marketing is different. It is a tactical response to the market environment indicated by carrying charges, and current price and basis levels.”
But Usset preaches flexibility.
“My celebrity producers act in a rote manner, for example, selling unpriced grain or unwinding a hedge in the last week of May. You don’t need to be so rigid,” Usset says. “If you have unpriced bushels in storage and the market hits your target price with a $1-per-bushel rally in January, you need not wait for the end of May to sell. Likewise, with selling the carry. If your basis objective is met by March, unwind the hedge and move on to executing your 2025 preharvest marketing plan.”
The only reason to do otherwise is if somebody is paying you to store their grain.
McKinney has an advantage in that his farm grows for seed. For that service, the production contract includes a storage payment. For the rest of the crop, he figures that cost of storage in his budget and cash flow projections.
Indiana farmer Tom McKinney offers this tip to young farmers: Be the budget expert. “Very few farms have somebody who likes to do the marketing and, more importantly, likes to do the farm budgets,” he says. Credit: Pam Caraway
McKinney held onto his grain one season when he was convinced a drought would hit.
“You wake up three or four times a night, not necessarily in a cold sweat, but that’s not fun, right? And I’ve only done it once in my life — and learned from it,” he says.
The drought hit. Prices went up. But McKinney will never put himself through that again. He refuses to pay the other huge cost in holding onto a crop: the mental anguish.
“I learned a lot about myself,” he says. “I did lose a lot of sleep. I sold $9.50 corn in August — and it was not worth it.”
Source: Farm Progress