Iowa farmers face challenge selling crops

AMES - An Iowa State University Extension crop markets economist is warning that Iowa corn and soybean farmers will face challenges selling what is expected to be bumper crops from this year's harvest.

'For both crops, whether you use the futures market or USDA projections, farmers are staring at prices below the ISU estimated costs of production, which are $4.50 per bushel for corn and $11 per bushel for soybeans,” said Chad Hart, an associate professor of economics. 'So pricing opportunities are thin.”

New crop corn prices in central Iowa are in the $3 to $3.25 per bushel range, while prices for soybeans are in the $9.50 to $10 per bushel range.

The last U.S. Department of Agriculture yield report estimated slightly more than 14 billion bushels of corn production, topping last year's record. Feed, ethanol and export demand were all increased, raising total demand to 13.435 billion bushels.

Carryout - the amount left over - would be 1.8 billion bushels.

The USDA projected soybean production of 3.8 billion bushels. Demand for the 2014 crop was unchanged at 3.54 billion bushels.

Soybean carryout was raised to 430 million bushels.

Hart said farmers should prepare for harvest, get their bins ready for storage and work out what they need for break-even prices.

'When we do get rallies - and we will, but they will likely be short-lived - farmers need to be ready to pounce,” Hart said. 'Watch for basis plays as we move toward harvest.”

Basis is the difference between the futures price in Chicago and the local cash price. When marketing crops, producers can make marketing choices that target the futures price, the basis or the combination of the two (the local cash price).

'With a basis play, producers may wish to base selling choices on the basis alone - the most common choice is a basis contract - to grab a good basis value, while allowing the futures price time for potential improvement,” Hart said.