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  Tuesday September 30th, 2014    

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Too much Minnesota grain is sold in the bottom third of the market (11/26/2006)
By David Bau

U of M Extension Service

A proverb in grain marketing states that two-thirds of the grain is sold in the bottom third of the market.

Is this true in Minnesota? To find out, I used data collected by the Minnesota Agricultural Statistics Service that states the percentage of the crop sold each month of the crop marketing year for corn and soybeans.

I used this information on when the grain is sold, along with cash prices offered in Worthington Minn., for the same months each crop year. My analysis was for crop years from 2001 to 2004.

The results: With corn sales in Minnesota, 36 percent of the corn was sold in the bottom 1/3 of the market; and 51 percent of the corn was sold in the bottom _ of the market prices offered each crop year. For soybeans, 53 percent of the crop was sold each year in the bottom 1/3 of the market prices offered, and 69 percent was sold in the bottom _ of the market prices

One factor I found very interesting is that not one month was in the lowest 1/3 of the price range in all four of the crop years for either corn or soybeans. Prices ranged an average of $2.73 for soybeans from high to low prices over the four crop years. For corn, the average price range was 83 cents. This represents a significant amount of revenue to farmers.

Iowa State University data states the average farmer's profit is 20 cents for corn and 30 cents per bushel for soybeans. Let's say farmers were able to sell more of their grain at or above the bottom _ market price level, instead of receiving the bottom 1/3 price. That would mean an additional 8.5 cents per bushel for all corn sold during the year, or an additional 24 cents on the 36 percent of the crop sold in the bottom 1/3 of market prices.

With soybeans, an additional 23.9 cents would be received on all soybeans sold during the crop year. For the 53 percent sold in the bottom 1/3 of the market, an additional 45 cents of income would be received.

Receiving these higher prices on sales at the bottom 1/3 price and moving them up into the bottom _ average market prices offered during the crop year, would increase the corn farmer's profit by 42 percent. For soybeans, profits would increase by almost 80 percent.

A good marketing plan that will help a farmer take advantage of the higher prices when they are offered would have a dramatic impact on profits. 

 

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