Do you ever feel overwhelmed by all the jargon in grain marketing?
You walk into the local co-op, hear the coffee group talking about ‘new crop’ corn being down around $.04, and think to yourself…what does that mean?
Every industry has jargon, but not every industry uses it outside the four walls of their company quite like the Ag industry.
If you’re working with farmers in any capacity, or living on a farm and still learning grain marketing, I’m sure you’ve heard some terms like ‘new crop,’ ‘old crop,’ and ‘front month’ futures thrown around in conversation a time or two (or 20) :).
In this post, you’ll learn what it means when people talk about ‘new crop’ futures.
In following posts over the next couple of weeks, I’ll also cover what ‘old crop’ and ‘front month’ mean, so stay tuned. I wouldn’t give you an article title like that and then just leave you hanging!
The term ‘new crop’ does truly refer to the futures contract that is used to buy and sell the ‘new’ crop of the commodity when it’s harvested.
Once the commodity is stored and sold later after harvest, it’s considered ‘old crop.’
The tricky part comes in when trying to figure out (and remember) which futures contract is considered the ‘new crop’ contract for each commodity
Why?
Because it’s not the same for every commodity, and the futures month doesn’t necessarily match the calendar month that harvest falls in.
Just telling you which futures month is ‘new crop’ for each commodity isn’t going to make it stick, so here’s a quick way to learn!
- Go to the the website of a cash grain buyer you do business with and find their bids.
Example: https://cargillag.com/LocalBids/FindALocation
- Next, on the bid sheet, look for the bid that’s for harvest delivery for the commodity.
Example: For corn, there may be a bid for delivery during October, or October – November.
- Now, pay attention to the futures symbol that’s listed on the harvest delivery bid.
Example: For corn, you should see a CZ0, CZ20, or Dec20 on harvest delivered bids and for soybeans you should see an SX0, SX20, or Nov20 for harvest delivered bids.
Note: You won’t always find this in a column on it’s own like it is on my image below. Each website and bid sheet differs in formatting.
Ok, so now think back to the coffee shop conversation…the coffee group said new crop corn was down $.04 today, right?
So, what did they mean?
Well, they’re specifically talking about how much the price of the new crop futures contract moved today.
So, now that you know which futures contract for the commodity is considered the ‘New Crop’ based on your findings on the cash grain buyer’s bid sheet, let’s take a look at a list of futures prices.
Notice where my arrows are pointing in the image above.
- First, I found the same futures contract I saw on the cash grain buyer’s bid sheet that was listed on the harvest delivered bid (CZ20).
- Then, I look at the change column for that futures contract, which indicates how much the price for new crop (CZ20) corn has fluctuated from the previous day’s closing price.
In this case, December corn (CZ20), or, ‘new crop’ corn, is down 4 and 3/4 cents.
i.e., around $0.04 like the coffee group said. 🙂
Now, next time you’re in the coffee shop, go ahead and walk up to the farmer group and feel confident telling them how much new crop corn is up or down today!
I bet you’ll impress them and maybe even make a few new friends. 🙂