Is $500/ac return over COP (including land and actual labor charges) within reach for 2024 corn with APH 200 and basis zero?
How do some farmers get a higher average revenue per acre than others? The most obvious answer is that some farmers have soil and weather conditions which naturally and consistently produce more bushels per acre. Some are located geographically where the average basis is consistently higher than others. Some have learned to take better advantage of the market pricing than others. The decision over which you have the most direct control within a geographical, weather, and soil type area is choosing when to lock in available prices.
Not everyone has an APH of 200 bushels for corn and a positive 50 cent basis per bushel, so there are an infinite number of combinations that can be generated when evaluating marketing potential and performance. If we use an APH of 200 and zero basis, everyone can (and should) compare their results to a standard baseline to really understand how well their marketing plan is performing.
Let’s start by taking a look at what was available for complete marketing period for the 2018-22 crops. The average high for the December contract was $5.47/bu or $1094/ac and the average low was $3.48/bu or $696/a, producing an average range of $1.99/bu or $398/ac that was at your discretion. The average “do nothing” contract expiration price was $4.84/bu, or $968/ac, 68% of the ranges that were available. If you decided not to take any pricing action with the December contract, you would leave $126/ac in the field. Many of you have been told this is the safe decision and you can make it up with basis improvement and carry above your storage costs.
For those who do not use December contracts for pricing, the average high for the July contract was $6.55/bu or $1310/ac and the average low was $3.52/bu or $704/ac, producing a range of $3.03/bu or $606/ac per acre that was at your discretion. The average “do nothing” contract expiration price was $5.52/bu or $1104/ac, 66% of the ranges that were available. If you decided not to take any pricing action with the July contract, you could have increased your gross revenue by $136/ac but left another $606/ac in the bin.
Using both December and July contracts to assist with the pricing, the December contract could have been priced at the average high and lifted at the average low for a hedging gain of $1.99/bu. Likewise, the July contract could have been priced at the average high and lifted at the average low for a hedging gain of $3.03/bu. Combined, the hedging gain of $5.02 could have delivered an average effective price of $10.54/bu or $2108/ac. Of course, I know it is not realistic to believe someone has a system that could have picked 10 tops and 10 bottoms correctly succession. But don’t kid yourself, if the “do nothing” plans generated an average price in the top one-third of the price range (68% and 66% respectively), then $7.50/bu or $1500/ac was available by only capturing 40% of the trading range that was available. Conservatively, that is $500/ac return above COP (including land and actual labor charges).
Is $500/ac return over COP (including land and actual labor charges) within reach for 2024 corn with APH 200 and basis zero using your current marketing plan?
