SDSU price outlook meeting not optimistic Farmers attending the South Dakota State University commodity price outlook meeting, were told prices likely will not improve in the year 2000.
Farmers were urged to get creative when marketing their commodities and try several marketing alternatives.
The SDSU Economics Department sponsored the 25th annual Commodity Price Outlook Meeting February 24 at the Brookings Inn. The event helps farmers try to make spring planting decisions based on the price projections given by field specialists.
Dick Shane, head of SDSU's Economics Department stressed the importance of farmers having a marketing plan and using all the risk management tools available, such as crop revenue insurance.
Randy Englund, executive director of the South Dakota Wheat Commission presented the wheat outlook for the coming year. Projected average all wheat prices were $2.50 to $2.70, with prices slightly higher for the spring wheat price and slightly lower for the winter wheat price. Shane saw no opportunities for using forward pricing as a marketing alternative at this time, because of a wide basis. He sees using the loan deficiency payment (LDP) and loan rate in combination with the use of storage as the best alternative.
Larry Kleingartner, executive director of the National Sunflower Association projected a dollar increase in oil sunflower prices in the spring. He added that by the year 2001 sunflowers could be at the $10-11 range.
The soybean and corn outlooks were given by Roger Krueger, director of grain marketing for the South Dakota Wheat Grower's Association. Low prices were forecast, with soybean carryover at 600 million bushels and corn carryover at over 2 million bushels. Pending normal crop production, November soybean futures prices could fall to $4 a bushel. Shane offered the possibility of a weather rally in the spring bringing the November futures price up and a possible pricing opportunity with a dollar LDP added onto that at harvest time.
"What I'm suggesting is, perhaps, using your marketing tools and locking in some prices that may not really look that desirable," Shane commented.
On the corn side, the December futures could go down to $2.25, with a basis of 55 cents to 65 cents under. "I used to always say that if you get a rally to $2.75, take it. We're off of that this year," Shane added. Shane told farmers they might have to take a lower price, use the LDP and take advantage of small rallies.
"Now, if we go into a situation without a drought, we are looking at some seriously low prices in all these commodities," Shane said.
With so much corn and soybeans still in storage and a normal crop expected this year, basis is expected to be wide. Alan May, Extension grain specialist at SDSU, used last year as an example.
May said that, last year, grain that was under loan started hitting the market the first of July when the loans started to mature. Basis began to widen out on corn six to seven weeks earlier than normal because large amounts of corn
were moving during June, July, and August.
"South Dakota cash prices dropped about 15 to 20 cents over a period of about two and a half weeks," May said. "So we had a lot of grain moving all at once. Right now we've got about 1.6 billion bushels of grain under government loan, maybe less. Nevertheless, we are set up for that same thing happening again."
Shane advised farmers to figure their strategies using a wide basis. Shane added that 55 cent basis on soybeans may be a very good basis to lock in, with 50 cent on corn.
"Don't look for a 40-under basis for locking in, you have to give a little on that," said Shane.
Al Bender, state climatologist at SDSU, said that there is a 75-percent to 80-percent chance of a below normal soil profile going into planting season. He suggested that farmers watch the long-range forecast closely and examine the information critically, until a strong signal can indicate what the future will bring.
Shane then gave the audience some time to tell about some of their own marketing alternatives that work well. Several options were discussed including the use of a hedge-to-arrive, which locks in the futures component without locking in the basis.
Shane invited farmers who could use free one-on-one help managing a marketing plan to contact him or Alan May at SDSU, or to contact their area farm management specialist.