August 18, 2004 | By: Laura Skillman
PRINCETON, Ky.

August crop estimates call for potential record corn production along with a near-record soybean crop. In light of those estimates, there are some things farmers should consider as harvest approaches, says a University of Kentucky College of Agriculture economist.

“Their first job every year is to know what they will likely have to sell directly off the combine and sell those bushels,” said Steve Riggins, UK grain marketing specialist.

Hopefully, farmers have already done that, he said. Using the December futures market, farmers selling in April could have priced corn for $3.42 per bushel versus waiting until Aug. 13, when the market closed at $2.28.

Soybean prices also have dropped as the crop’s progress this growing season has looked promising. In late March-early April, November futures were $8.02 compared to the Aug. 13 close of $5.80 ¾.

The U.S. Department of Agriculture estimates released Aug. 12, are somewhat bearish in terms of the corn crop with the 10.9 billion bushel U.S. crop larger than anticipated along with global figures being up even more, Riggins said.

“The corn is a little bit of a surprise but not a shock,” he said. “It is somewhat bigger than anticipated but usage is also up tremendously, resulting in only a modest buildup in stocks and globally, stocks aren’t going to build.”

Riggins said the market may not be at the bottom yet but he expects it is close and should move back up in the winter.

Kentucky ’s growers are expected to produce 161.9 million bushels of corn, the biggest crop since 1992. Yields could equal the record of 142 bushels per acre set in 2001.

Soybean estimates were more positive with a somewhat smaller crop estimated, he said. This crop, estimated at 2.88 billion bushels, is further from maturing than corn and there is some concern with heat units and diseases. If the crop were to get 5 percent smaller, bean supplies will be tight again and put pressure on the South American crop to be as large as anticipated to meet demand. If it is 5 percent larger, then soybean prices will drop further, he said.

Kentucky ’s soybean crop is estimated at 52.1 million bushels, down from 2003. Yield is expected to average 41 bushels per acre.

“From a farmer’s marketing perspective everyone is already focused on the Sept. 12 production report,” he said.

Riggins said he anticipated the market to move more along a sideways track for the next month. In the September report, the same fields will be checked as in the August report. They will tend to have more accuracy, he said, as the crop will be more mature.

In the meantime, farmers need to refresh themselves on how the loan deficiency payment and counter cyclical payment programs work. Riggins said there may be an opportunity at harvest to capture some LDP money on corn but it is less likely to happen with soybeans.

Producers also need to learn how to use some of the option tools so they can sell $6 soybeans knowing they may go to $10 per bushel, he said. Purchasing various options can allow growers to recoup increases in crop prices after selling the grain.

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Contact: 

Writer: Laura Skillman 270-365-7541 ext. 278
Source: Steve Riggins, 859-257-7256