PERFORMANCE OF SELECTED PRE-HARVEST AND POST-HARVEST CORN AND SOYBEAN MARKETING STRATEGIES VS. ALTERNATIVE MARKET BENCHMARKS

This study was undertaken to update earlier work by the authors that analyzed selected preharvest pricing strategies utilizing options markets to establish a price floor for part of the crop in the spring, with additional pricing done by use of short hedges in early summer. The timing of implementing these strategies was moved back to late February if the previous year's U.S. crop was a weather-induced short crop. A weather-induced short crop as opposed to a government program induced short crop was defined as one in which U.S. production fell below the previous year's use and the U.S. average yield was at least 6% below a trend yield. Previous work by the authors indicated that selected pre-harvest strategies applied to actual farms in Iowa and Ohio over the 1985-1998 time period generated net returns well above those from a naive strategy of systematically selling at harvest, with t-tests indicating statistical significance at the 5% level. Similar results were observed when the time period was extended to 2001. The results from this study may explain the observed increase in the use of forward pricing by farmers, the emergence of new pre-harvest marketing tools focusing on late winter and spring pricing opportunities, and the emphasis on pre-harvest pricing by market advisory services (Irwin et al., 2003). Results reported here suggest that over the past 18 to 29 years, farmers have had the potential to reap substantial economic benefits from improving both their pre-harvest and post-harvest marketing skills.