Continued low commodity prices foreseen The 225 farmers attending a commodity price outlook meeting Feb. 25 in Brookings saw a mostly grim picture for crop prices in the year ahead.
They also were advised to sharpen their marketing and risk protection skills while watching production costs.
Grain traders and marketing specialists do not foresee break-even prices this year on the mainstay crops grown in this state, barring some unforeseen widespread weather catastrophe.
The 24th annual Commodity Price Outlook Meeting sponsored by the Economics Department at South Dakota State University drew farmers from all over the state and from Minnesota who try to make planting decisions based on the prices expected by the best minds in the business.
The meager prices projected across the board this year conjured up images of a price list that retired economist Art Sogn used to display for comic relief in his early days of conducting the outlook meeting.
That list from the turn of the century listed the price of shelled corn at: two cents a bushel dry, one cent wet, and ear corn two cents less.
"We're kind of getting ourselves in that position," lamented Dick Shane, head of SDSU's Economics Department, as he summed up the day-long meeting. "That was 100 years ago, and if you inflate the cost and everything for 100 years, the price today is not a whole lot different. We laugh about it, but it's not funny, in fact it would make most of us cry about it if we keep dwelling on it too much."
"Are we avoiding making price forecasts? You're darned right we are," said Shane as he prepared to summarize for other speakers.
Gene Murra, professor emeritus, was bold enough to forecast $60 a hundred for fed cattle, $70s for steers 700 to 800 pounds, and $80s for steers 500 to 600 pounds this year.
As for corn and soybeans, based on a talk by Dennis Inman of Cargill, Inc., Shane advised farmers to begin marketing their crop on small rallies of 20 to 30 cents over current December future prices. "Inman said you'll have a chance to price corn, but it will be lower," Shane said.
December futures closed at $2.34 on Feb.26, down seven cents.
"As for soybeans, this time of the year, we're usually talking about $6 futures. This year, if we get a rally to the mid $5's (on Chicago futures) we'd better take it," he said.
This year on corn, if futures rally to $2.65, "we'd want to protect that," Shane said.
The economist-educator encouraged farmers to price their crop and then work the pricing with loan deficiency payments and crop insurance.
"We really need to protect that downside, yet keep some upside potential. That usually would involve buying a put or some combination of market alternatives equivalent to a put," Shane said.
Shane sees some chance for pricing on small rallies, as might occur with the USDA crop production and planting intention reports at the end of March. U.S. domestic carryover of corn is large at 1.786 million bushels, even for world stocks, Shane pointed out. Soybean carryover also is high at 410 million bushels, also on the heels of a bumper crop.
"As long as we have that much in storage, we can't expect prices to rally," Shane said.
The problem this year is so much corn and soybeans still in storage, he added.
"Once a farmer takes that loan deficiency payment (from the local Farm Service Agency), the corn is ready to sell. Some farms will sell, and the price goes right back down again," Shane said.
Inman said that 75 percent of the corn carryout is in the western Cornbelt. "That means a wide basis," Shane said. "It means you've got to plan for an even wider basis than the present. Watch the basis contract."
A farmer concerned that crop prices won't cover cost of production this year, asked at what point one should decide not to plant.
Shane's answer: "As long as you can cover your out-of-pocket costs, your seed, your fertilizer, your variable costs ? and still make a little bit to help you make your land payment and your combine ? then I would plant."