FROM THE MANAGER
Dear members & patrons
I
mentioned in our last edition of the Connection that I thought our 2015 crop year was a very challenging year for our producers and possibly the beginning of a challenging era . Now that I look back , the challenges are even greater than expected .
Despite all the rain , we were able to harvest a very respectable grain crop in most instances . Some producers saw record yields on corn acres while other areas had very poor yields . The hit and miss rains before and during harvest were either too much or too little in specific areas . Regardless , your cooperative handled a record number of bushels of corn at 5,267,626 and milo at 1,551,246 . Even with the flat storage we operated at 108 percent capacity . Handling a crop this size without the additional million bushel storage capacity would have been complicated and costly to not only your cooperative , but to your bottom line .
We saw December 15 corn futures go from $ 4.49 per bushel on June 19 , 2016 to $ 3.15 per bushel on August 31 , 2016 and then back to $ 3.49 per bushel on October 5 , 2016 . That same contract of December 2016 futures actually traded at $ 5.32 per bushel on June 19 , 2013 . The difference from June 19 , 2013 to a low of $ 3.15 per bushel on August 31 , 2016 is $ 2.17 per bushel . I know we can all look back at what we should have done , but I urge producers who intend to be farming year after year to watch for opportunities to lock in profits . If we are going to grow corn , cotton , milo or soybeans , just know that we have bushels to sell based on your average yields . Producers have a phobia about making margin calls on short futures contracts , but everyone who didn ’ t react just made a $ 2.17 / bushel margin call on any corn or sorghum that they didn ’ t hedge or contract . On 140 bushels corn yield like we ’ ve seen in some areas this year , that would have been $ 303.80 per acre not in your pocket or bank .
I understand that I may be exaggerating a little , but the point is that we cost ourselves by not making more decisions early on . We must know our breakeven costs with a return to management covering production costs , living expenses , insurance , taxes and whatever else to be able to react when these opportunities are there . I am proud to say that between our grain pools and our non-pool patrons , a good percentage did take advantage of our futures only / HTA contract and many did contract in the $ 4.00-4.40 futures range . These same scenarios hold true for all our commodities from soybeans to cotton to cattle .
Our merchandising staff has budgeting tools available to help you figure breakeven costs and is willing to devote the time to be of assistance . We can also give you files that you can take home to enter your own numbers . To stay in business , we have to take control of our own destinies . We can all see that agriculture is not a top priority to our country , our congressmen or anyone who may be elected as our next president . With that being said , I still encourage you to go out and vote — this is a critical election .
As you all know , we have seen about the worst cotton harvest that I can recall in my 31 years with United Ag . Many acres of cotton received up to 30 inches of rain after they were defoliated and ready to pick . Cottonseed sprouted in the bolls , lint quality deteriorated and much yield was lost . Grades have dropped to where average loan prices are approaching . 46 cents , which is about . 06 cents below base loan . Although not good , this is significantly better than we expected with all the rain . The biggest hit our producers are suffering from is yield loss and the terrible seed quality . Producers rely on seed sales to offset ginning costs . Early in the season when seed quality was good , producers were receiving around $ 50.00 per bale for seed . As seed quality declined , the price we received for seed dropped significantly and your cooperative was forced to make adjustments to what we could pay for cottonseed . This adjustment equated to producers being paid between $ 13 to $ 14 per bale of cotton for seed . After the season , we will average the price received and rebate any overage to the affected producers . Hopefully it will average out to be a decent rebate . This is the same concept that we apply each year to Aflatoxin discounts . In years past of damaged milo , the discount is taken upfront to cover any loss expe-
6