NEWS for North Dakotans
Agriculture Communication, North Dakota State University
7 Morrill Hall, Fargo, ND 58105-5665
April 20, 2000
George Flaskerud, Extension Crops Economist
NDSU Extension Service
Recent precipitation throughout U.S. growing regions has caused prices to pull back from
the March-April highs, but the National Weather Service continues to project, as of April
17, below-normal precipitation in portions of the Corn Belt and winter wheat areas during
the May-July period. So, price volatility is likely to continue, and price opportunities
should continue to surface.
Most of the 1999 spring wheat crop has probably been sold. If not, consider selling it on a minimum price contract (MPC). The basis for old crop wheat has improved, and it generally peaks during the spring months. In the MPC, look at specifying the purchase of a September call option, but spend no more than 10 cents a bushel. On April 17, that meant buying the call at a strike price 20 cents above where the market was trading.
For new crop spring wheat, consider a futures fixed contract on one-third of anticipated production. I would choose this contract instead of a cash forward contract since the basis that I have heard about in new crop contracts is weaker than expected for next fall. The basis is left open in a futures fixed contract. I would specify the Minneapolis December futures in the contract and target $3.60 to $3.80 for making sales of wheat that would be delivered in November.
For corn still in the bin, consider a futures fixed contract in the July futures because of the basis. It has improved but it is still weak. The basis improved considerably in June last year. The July contract, which closed at $2.35 on April 14, reached a high of $2.49 on March 17. Price recovery close to that high should be considered selling opportunities.
Price objectives of $2.50 and $2.60 in the December futures have been hit for new crop corn. December corn has been as high as $2.64, and it closed at $2.52 on April 14. Consider futures fixed contracts on one-third of anticipated production at those price objectives.
For soybeans in the bin, consider getting sold out on any move toward $5.70 July futures. The high in the July contract was $5.66 on April 3, and it closed at $5.44 on April 14.
The price objectives that I have been using for new crop soybeans range from $5.60 to $5.95 November futures for getting up to two-thirds sold. Half of that amount should be in a futures fixed contract and the other half via put options. November futures, which reached a high of $5.79 on April 3, closed at $5.57 on April 14.
The crop progress report released by USDA on April 17 showed that, as expected, corn, soybean and spring wheat plantings are off to a good start. Also, the winter wheat crop continues to improve. It is now rated 62 percent good-excellent, versus 61 percent last week and 69 percent a year ago.
Ending stocks of wheat were projected by USDA on April 11 to be 943 million bushels, 54 million less than projected last month. The reduction came as a result of an increase in feed use and exports. The level of ending stocks is projected to be about the same as at the end of the last marketing year. For the classes of wheat, ending stocks were projected to increase only for hard red winter wheat.
USDA now projects that corn ending stocks will be 20 million bushels higher than projected last month. The increase came from a decrease in exports that was not offset by an increase in food and industrial use. Although up from last month, ending stocks are expected to be down 28 million bushels from the last marketing year.
Soybean ending stocks are now projected to be down 20 million bushels from last month's projection and down 43 million bushels for the marketing year. Crush was reduced, but exports were increased. Exports are now projected to be 129 million bushels higher than during the last marketing year.
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Source: George Flaskerud (701) 231-7377
Editor: Dean Hulse (701) 231-6136