Commentary by
Kevin McNew

Beating The Weather

  

The futures markets continue to trade up and down based on the most recent weather model. With a hot, dry summer predicted and crop conditions scores that are already below average, weather will continue to be a driving force in the market.

Looking beyond the weather related movements, the USDA recently lowered corn yield forecasts and some analysts expect them to be lowered further. Lower yields could lead to lower ending stocks but only if exports cooperate. Corn exports were at 32 million bushels this week, which was the high end of industry expectations, but still below the 45 million per week that will be needed to meet USDA expectations.

For soybeans, exports were 2.49 million bushels which was below expectations of 5-9 million bushels and below the 11.1 million bushels necessary each week to meet USDA forecasts. Monday’s crop condition scores are expected to be lower by about 2%. The USDA recently lowered their ending stock forecast for 2005/2006 to 210 million bushels which is still above the average estimate of 195 million bushels. The final stocks will depend largely on rain, and if there is sufficient we could still get above trend yields.

Even after hours of researching the fundamentals you might not be able to predict the next rainfall and therefore the next movement in the futures market. However with a little research you can identify the best cash market in your area and profit from it.

Identifying a premium market and earning several extra cents on a cash sale can help eliminate some of the stress of a volatile futures market. Profits from trucking grain have increased in the past month. The tables below calculate the net profit, after trucking costs, from selling grain to one of the key markets listed below rather than to the local elevators. In other words producers outside of Davenport, IA on average can earn an extra 4 cents per bushels from trucking to Davenport rather than their local elevator.

Net Profit From Trucking Corn to Select Cities
State
City
Jul-05
Jun-05
Jul-04
IA
Clinton
5
7
6
IA
Davenport
4
4
6
IA
Eddyville
4
3
3
IL
Bloomington
3
3
3
IL
Mendota
5
7
5
IL
Pekin
5
6
4
IN
South Bend
6
4
5
MN
Marshall
3
2
3
NE
Albion
1
3
-
NE
Columbus
4
3
3
OH
Toledo
2
2
3
SD
Big Stone City
3
1
2
SD
Chancellor
4
3
6

Trucking opportunities for corn decreased as planting came to an end and more producers had time to seek out premium markets. Now, however, it appears that trucking corn is becoming more profitable again in some locations such as Eddyville, South Bend, and Columbus. In many of these other premium markets profitability was down or unchanged from last month. For the most part, trucking corn was more profitable last year, but we are seeing improvements that are worth watching.

Net Profits From Trucking Soybeans to Select Cities
State
City
Jul-05
Jun-05
Jul-04
IA
Cedar Rapids
8
7
8
IA
Davenport
8
8
8
IA
Des Moines
11
9
-
IL
Bloomington
10
9
8
IL
Galesburg
11
13
31
IL
Quincy
9
7
7
MI
Zeeland
9
11
27
MN
Mankato
6
4
8
NC
Raleigh
26
22
27
NE
Hastings
24
11
12
NE
Lincoln
23
13
16
OH
Toledo
4
3
10
SD
Volga
5
5
7

Returns from trucking soybeans did not fall as sharply after harvest as they did for corn. This trend continues as it appears that premium markets are continuing to offer a significant spread over smaller markets. Net profits from trucking were up in all of the locations listed, except Zeeland. Premium markets in Hastings and Lincoln have become considerably more profitable in the last month.

Monitoring your local basis can be an easy and reliable way to earn extra profit that may be hard to come by in a volatile futures market. Remember that depending on trucking costs and the disparity between markets it can often pay to truck your grain over 100 miles.