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A return to ‘old-style’ crop marketing

After a nice run of profitability in recent years, grain and soybean farmers now face what could be an extended period of grain prices that are at or near breakeven.

Chad Hart, crop markets specialist with Iowa State University, foresees a more traditional pricing pattern over the next few years, with market lows at harvest and market highs in the spring.

“That more traditional pricing pattern that we used to experience—say 5, 6, 7 years ago—before the biofuel boom took us to the record high prices and before the drought helped continue those record high prices,” Hart says.

Which means a return to what Hart calls “old-style” crop marketing.

“Where it’s sitting down and think about, ‘Okay, what’s the futures market look like it’s doing for us—what’s the basis doing for us’,” Hart says. “Breaking that price apart and being willing to lock in the futures when it’s attractive and being able to lock in the basis when it’s attractive.  Working both sides of that marketing equation to capture the best return we possibly can.”

In addition to sharpening their marketing skills this winter, Hart says farmers will also have some big decisions to make on the new commodity programs in the farm bill.

“They’re going to have to be putting a little pencil to the paper—do a little work—not only their crop marketing, but on how they want to utilize the farm bill program.  That’s a good homework assignment for this winter.”

AUDIO: Chad Hart