Soy farmers get tips for marketing crop
Published 12:00 am Thursday, February 2, 2006
MONTEREY &8212; An agricultural economist told parish farmers Tuesday they must get creative to stay ahead of the game in the soy business this year.
Kurt Guidry said the outlook was bleak for the 2006 crop year, despite the promise that biodiesel and ethanol will increase the demand for soy. Guidry was the speaker at a pesticide re-certification meeting hosted by the LSU AgCenter.
Soybean futures on the Chicago Mercantile Exchange are trading at
Email newsletter signup
$6.31 per bushel for October/November delivery as of Monday&8217;s market close. This is a price Guidry thinks is inflated by speculative traders looking for quick profit and doesn&8217;t think will last all summer.
He said fears about weather in South America affecting the Brazilian and Argentine crops may also be aiding the price for now but doesn&8217;t expect it will amount to much.
Guidry was bearish about the future, however, because 500 million bushels of last year&8217;s crop remains unsold.
Without some kind of weather problem to decrease the acres being planted, prices are going to be pressured downward, Guidry said.
If there were a national carryover of 125-250 million bushels, minor weather troubles would have a positive effect on the price.
&8220;I don&8217;t think a drop in South American production will do much for the price,&8221; he said.
Corn faces a similar glut of supply, he said. The supply of wheat has begun to drop, but the demand has yet to rise to meet it.
With that, Guidry advised the audience to consider locking in the current future price in order to hedge against the price dropping in the future.
&8220;You&8217;ve got to be more aggressive if you want to make money this year,&8221; he said.
There are a number of ways a farmer can help ensure a successful season.
He can choose to enter into forward-pricing agreements with his local elevator. These agreements commit both parties to a quantity, price and delivery date and gives the farmer bottom-line protection &8212; assuming he lives up to his end of the agreement.
If he wants the safety of a forward-pricing agreement but wants maneuverability in case the price goes up, he can add a call option to his agreement.
Or, if a farmer wants to avoid the uncertainties of production, he can trade futures and options on the exchange.
County Agent Glen Daniels, who hosted the event, said the goal was to get help farmers do their homework before they plant in order to make sure they get their bills paid.
&8220;I don&8217;t want them speculating. That&8217;s like taking money to the (casino) boat,&8221; he said. &8220;(But) if you know your basis is $5.50, sell some at $6 to cover your costs.&8221;