Farmers Wary After Wild Swings in Futures Markets
WAPELLA, Ill. (AP) _ It’s gambling season in the heartland, but farmers are a little wary this year about how much they’re willing to bet.
After a disastrous planting season that sent prices skyrocketing, many farmers are now facing the tough decision over when to try to lock in prices for their fall crop. They are toying with whether to move now and risk prices will rise later or wait to see how the market fares in the upcoming months and possibly miss out on the payoff of a lifetime.
``Last year, guys that sold early wished they hadn’t have. That may have changed some people’s thinking,″ said Vic Riddle, president of the Illinois Corn Growers Association.
Bad weather across much of the Corn Belt this spring delayed planting at a time of dwindling grain stockpiles and industry watchers say that weather conditions must be near perfect for the rest of the year to ensure an average harvest.
That sent corn prices to record highs and caused wide swings in the grain markets. In fact, many farmers locked in a price of around $3 per bushel for their corn last June or July, only to see tight supplies and growing demand push prices above $5 a bushel earlier this year.
Such concerns are prompting many farmers to wait until later in the growing season to set a price for their crops.
``I’m just sitting on my hands,″ said Ned Heltsley, who farms 1,000 acres of corn, wheat and soybeans near the Kansas border in Edgar County, Ill. ``I’ve sold probably 20 percent of my expected production, and I’m not really going to sell any more until I get a better idea of what yields are going to be.″
At the present time, there doesn’t seem to be any slowdown in the market. On Monday, the expiring July contract for corn broke this spring’s all-time high, rallying on an Agriculture Department report that stocks could be almost exhausted before new supplies start arriving in September.
Corn for December, March, May and July delivery all fetched contract highs on Monday also. Prices, however, retreated on Tuesday on revised predictions that the Midwest will be spared drought-like conditions in the next week.
Already some have been hurt by the continued strength in the market.
For farmers who had complicated marketing arrangements such as hedge-to-arrive contracts, which are profitable when grain prices fall after harvest, it’s been disastrous. Some farmers unable or unwilling to deliver grain on the unprofitable contracts put off delivery until July, and now prices are even higher and losses will be even greater.
Estimates of losses nationwide range as high as $1 billion.
``Somebody put the money out, and the money’s gone,″ said Ron Mortensen of Advantage Ag Strategies in Fort Dodge, Iowa. ``Either the farmers are going to pay it, the elevators are going to pay it, or the members are going to pay it if the elevator is a cooperative. Eventually farmers as a whole will pay for this thing.″
Many farmers, however, are watching their bets, unsure what hand to play in the volatile market.
``I sell ahead, but I rarely play the futures market,″ Heltsley says. ``It’s very risky. I’ve done it before, and I’ve been burned. It’s a rich man’s game and I’m not going to play it right now.″