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If the yields aren’t there – What options are available?
Sparse rainfalls and high temperatures have farmers worried about what they may actually find in their corn fields this fall at harvest. For farmers that forward contract grain – the possibility of not being able to fulfill those contracts adds even more pressure to an already stressful year.
So what happens if you’ve contracted grain and the yields aren’t there?
Scott Docherty, General Manager of East Central Illinois based Top Flight Grain Cooperative says they’re telling their growers they have three options available.
None of which, he says come without a cost. “They can go out into the marketplace and find bushels to purchase for their contract needs,” he says. “They can work with their grain buyer and tell them they know they are going to be short x-amount of bushels. An example would be if a farmer has 10,000 sold and you know you’re only going to have 8,000 bushels – we could buy in that additional 2,000 bushels for that producer.”
Docherty says because the drought is considered an “Act of God” the elevator can purchase the grain and still remains within the CFTC rules of letting farmers buy in and out of contracts.
The final option available is one Docherty says they don’t highly recommend. “The third option would be to allow the producer to roll it out into the upcoming crop year,” he says. “But you’re looking at a fairly significant discount to do that.” He tells Brownfield the discount to do that would be the spread is between the nearby Dec futures and the Dec 2013 futures. On Wednesday Docherty says that spread was approximately $1.60.
AUDIO: Scott Docherty, Options available for farmers (2:39mp3)
Docherty says it is best to work with your grain buyer to figure out what option is best suited for your operation.
2012-07-27 05:35:25
Source: http://brownfieldagnews.com/2012/07/27/if-the-yields-arent-there-what-options-are-available/
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