Minnesota

It pays to forward contract corn and soybeans, rather than selling them at harvesttime.

However, storing the crop from harvest until the following July or later rarely pays.

Those are two conclusions of Erlin Weness, farm management educator with the University of Minnesota Extension Service. He bases his conclusions on marketing data from the past 25 years.

"The best time historically to forward price is April, May and June," says Weness. "My data shows that an average farm would have made $21 more per acre by forward pricing corn the first week in April, May and June, rather than selling at harvest. Forward pricing soybeans would have resulted in $8 more per acre than selling at harvest. This is based on data from 1983 to 1999, at Worthington, MN."

On the other hand, Weness cites data that show waiting until July or later to sell is not profitable. From 1974 to 1999, the average increase in the price of corn from harvest until July was 19 cents per bushel. However, the storage cost was an estimated 32 cents per bushel.

Weness says corn prices went up 60% of the time by 47 cents per bushel for a storage return of about 15 cents per bushel or $22.50 per acre. However, prices went down 40% of the time by an average of 36 cents per bushel. Adding this to the storage cost of 32 cents per bushel resulted in a total loss of 68 cents per bushel or about $102 per acre.

Soybeans show a similar pattern, notes Weness. With eight-month storage costs of 48 cents per bushel, losses were over $48 per acre in years when prices fell. This was not enough to offset the years when prices increased.

"We have to sell sooner in the marketing year," says Weness. "Storage returns on corn are very hard to capture. Anytime you can get a price that is more than four cents per month per bushel, you had better be emptying bins."

It is a little easier to capture storage returns on soybeans, says Weness. The best months to sell are January through May 15; holding into July usually doesn't pay.

The best marketing plans, says Weness, are based on historic probabilities of price occurrence, seasonality of prices and normal price ranges. "Each year, many producers try to outguess the market and fail," he points out. "Playing the long-term odds will make you right 60 to 75% of the time, which is far better than seat-of-the-pants guessing. Put a plan in place for the 2000 and 2001 crop now, if you haven't done so."

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