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Financial Conversations with Fitz #54 - Crop Margins for 2010 - 02/23/2010

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Well can we figure that the snow has settled down for a while.   I have always wanted to start up a hot mix plant to melt our snow when it is this high.   The only good thing is the lack of frost that is out there with the snow cover.   Most of the snow might go down into the ground.   Problem there is the large carryover of subsoil moisture from this fall.

Today we are going to visit about our 2010 crops.   I know we have talked a bit about this starting back in July, but the time is here.  Have you made your plans and priced them.  I have been to several meetings and visited with clients.  It looks like the cash flow will work because of carry over from 2009 sales, but I have yet to figure out a way to get the actual profit to work with 2010.  Right now it looks like there is a margin of about $200 for land  without much left for labor or living.   Of course 200 bushel production in the cash flow will make quite a difference.     I question how many fields we have planted fence row to fence row actually produce # 2 corn in the 200 bu. range.  Our main objectives are 1—Cost of production, 2-Sizing up the market, 3-Strategies/Tools for managing margins.   There is some carry in the corn market currently (about  22 cents) until July…..not quite as much in the soybeans….(about 16 cents).  One concern I have is that fall beans are 20 cents less than today.   Corn doesn’t want to lose any sales to Japan.    They don’t want our blended spoilt corn mixed in with the # 2 corn because of our condition or at least suspected condition of the corn being shipped.    Mixing in a lot of junk corn just to meet inspection numbers might help the short term cash flow of the elevator but will hurt our corn market for a much longer time.

We need to get with our agronomists to get our pricing nailed down.   The next thing is to develop a marketing plan for 2009 and 2010 crops……Avoid the ‘Five Common Mistakes in Grain Marketing’ according to ISUE Extension.
-Reluctance Toward Pre Harvest Marketing, Failure to Understand and Track you Local Basis, Lack of an Exit Strategy, holding Grain in Storage Too long, and Misunderstanding Carrying Charges.

Be sure to work out your income and expenses with us at TSB or with your supplier.    I use the Ag Decision Maker from ISU.   You can put your own figures in to see how it works for you.  It is important that we remember the 79% of the time the best markets are from February thru July.  There are many meetings and conferences to present this information.   With the different insurance and revenue assurance programs it is safer to do forward pricing then it has been in the past.
Call or stop in to see us if you have any questions in any of our three offices. 

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