November 15, 2001

Market Advisor: Explore Marketing

by George Flaskerud, Crops Economist
NDSU Extension Service

Use price rallies to get caught up on wheat sales. I would get up to two-thirds sold during November and December on spring wheat and durum. Supplies of wheat are likely to keep a lid on prices. Use the minimum price contract or spring wheat call options to gamble on weather in the winter wheat states. In the November Supply and Demand Report, USDA projected a seasonal average farm price in the range of $2.70-$3.00, the same as a month ago.

Durum did show a reduction in ending stocks of 2 million bushels. This resulted from a decrease in imports of 3 million bushels and an increase in exports of 5 million bushels. The projected carryover of 20 million bushels is low but sufficient for now. A weather problem next year, however, could sharply change the picture.

The projected carryover for hard red spring wheat was also reduced. But, stocks for spring wheat are not nearly as tight as for durum.

Corn production was increased by 116 million bushels from the October projection, which was at the high end of trade expectations. USDA did not reduce projected exports even though export commitments to-date (Nov. 7) as a proportion of projected exports are about 5 percent below a year ago. The net result was projected ending stocks of 15.9 percent of total use versus 14.8 percent last month. USDA projected a seasonal average farm price in the range of $1.80-$2.20, down 10 cents overall from a month ago.

In the near term, it is likely that corn will experience some kind of post-harvest price increase, especially if the pace of exports improves. Longer term it is likely that the basis will improve as it usually does. As price objectives are achieved, sell in the deferred futures. I would pick July. This can be done with a hedge-to-arrive (futures fixed) elevator contract or directly in the futures market.

Soybean production also came in at the high end of trade expectations. In addition, imports, crush and residual were adjusted. As a result, ending stocks came in above trade expectations.

Getting a bump in the soybean price will require a weather scare in South America. Export commitments to-date relative to projected exports are running about 10 percent ahead of a year ago, so any reduction in anticipated South American production will raise expectations for U.S. exports and U.S. prices. USDA projected a seasonal average farm price in the range of $3.90-$4.70, the same as a month ago.

###

Source: George Flaskerud, (701) 231-7377, gflasker@ndsuext.nodak.edu
Editor: Tom Jirik, (701) 231-9629, tjirik@ndsuext.nodak.edu