For many farmers this week begins the grain marketing season.
Corn and soybeans produced in 2017 are marketed in 2018. Because the vast majority of farmers are cash basis taxpayers, and have been since they began farming, that marketing cycle will be never-ending.
The turn of the calendar and the new year allows new income to flow into the bank account unabated by income tax for another 14 months. Subsequently, truck lines will be long at grain elevators and grain processors as deliveries are made against January grain sales.
While the grain may flow freely, there are numerous issues at play during this annual rite.
The week prior to Christmas, farmers were discovering that the U.S. Department of Agriculture had signed an agreement with China that requires ships loaded with U.S. soybeans and destined for Chinese ports to carry documents which indicate if the foreign matter in the cargo, such as stems and weed seeds, exceeds 1 percent of the volume. U.S. soybeans are typically sold with no more than 2 percent foreign matter. This change has drawn quite a bit of attention, just as farmers are delivering soybeans which may or may not have more than 1 percent.
Richard Wilkins, former presidentof the American Soybean Association (ASA), said, “It’s going to raise the cost of sending soybeans to China.” He said soybean growers will not receive a premium for delivering beans with 1 percent or less foreign matter and China will be expecting No. 1 beans and knowing they will only have to pay for No. 2 beans.
Grain exporters were said to have been involved with the policy change through their trade association and have not commented on the change, which the USDA says will have no affect on soybean pricing. But groups like ASA are not sure about that.
At this time, many grain elevators are offering an incentive to farmers to take their grain at a time when farm work is complete and hauling grain from farm bins to the elevator will not conflict with more pressing work. That incentive is to suspend any fees related to delayed pricing.
Known as “Free DP,” the elevator will take possession of the grain and the farm operator will have a specified length of time to notify the elevator manager when he wants to establish the price, based on the elevator bid.
Farmers, being the optimistic folks they are, hope the price will go up. But by delivering grain to the market, the end users’ needs for grain are satisfied and have no reason to bid up the price this year. And with burdensome supplies of corn and soybeans from four years of abundant crops, it could be a long time before the price goes up.
So in the end, “Free DP” will likely not result in a higher price, but likely a lower price. The only advantage is that the grain has been delivered to the elevator and that task will not conflict with spring field work.
Once the calendar changes, the psychology of the harvest low prices is in the rear view mirror and farmers anticipate the market will slowly rise. Unfortunately, prices this winter may fall, along with the water levels in the Illinois and Mississippi rivers. The region is in the midst of a drought and low water levels in streams are insufficient to provide enough water for normal barge operations carrying grain to the export terminals at the Gulf of Mexico.
Subsequently, low water means barges are only partially filled to allow them to float, and such inefficiency means higher costs for the barge operator and lower grain bids at river terminals in the Corn Belt.
So how does a farmer create a workable marketing plan that will generate revenue with respect to breakeven prices? That answer is different for everyone, because every farm operator is different, along with farm cost structures and family financial needs.
One possible solution is with participation in a marketing club, where reliable information is exchanged, education is offered, and realistic farm budgets are matched with realistic marketing plans.
One such marketing club meeting occurred last night, and the next will be at 6:30 p.m. Tuesday, Feb. 6 at GSI’s Shuler Center in Assumption. The Central Illinois Marketing Club welcomes anyone interested. For more information, semd me a note at StuAgNews@aol.com.