Potential Gains from Storing Dry Edible Beans
Sept. 12, 2014
As dry edible beans set pods in the High Plains growing area (Nebraska, Colorado and Wyoming) and harvest approaches, it is time to finalize marketing plans for this year's crop. A new study to be released soon by UNL Extension suggests that storing beans into spring and summer could provide higher income for both Pinto and Great Northern market classes.
The report uses USDA Agricultural Marketing Service (AMS) data to evaluate the price patterns of Pinto and Great Northern beans using monthly prices indices. A price index is calculated by dividing the reported monthly price by the average price for the given marketing year.
Price indices show monthly prices as a percentage of the annual average price. This way, price patterns of different market classes of beans can be compared even if the actual price was different.
The monthly price indices are averaged together to obtain price patterns. For example, the average monthly price index for Pinto beans in November is 0.95. This means that November pinto prices are typically 5% below the marketing-year average.
A standard deviation is also calculated to show the amount of variation that occurs around the average price index. The larger the standard deviation, the less predictable prices will be during that month.
Several lessons can be learned from evaluating the seasonal price patterns for dry edible beans. The study shows that the lowest prices for both market classes can be found following harvest, from October through December. Prices are closest to the marketing year average and are most predictable in February and March. Prices are highest in spring and summer, but are also less predictable.
The study shows that there are potential financial gains from storage. On average, the monthly price index for Pinto beans increases 13% from the average monthly index low to average monthly index high, while Great Northern prices improve 17%. This indicates that if the price increase is greater than the cost of storage, producers can gain income.
Several factors will play a role in how growers might market 2014 dry edible beans during the coming year. Cash flow needs at harvest may warrant selling beans. However, if price patterns hold true, higher market prices could be captured by holding beans early into the new year. For those willing to accept more risk, gains could come from holding beans into spring and summer. But the longer beans are held, the greater the price risk and cost of storage.
Although understanding price trends is important for commodity marketers, average price patterns are just that, the average between highs and lows. The current market conditions will ultimately determine the price structure for the marketing year. Make sure you have determined your market strategy before new crop prices hit the board at the beginning of harvest. Target prices and a set selling plan will help minimize price risk.
A link to the report, "Pinto and Great Northern Bean Prices: Historical Trends and Seasonal Price Patterns," will soon be available at go.unl.edu/pagecon.
Extension Educator – Ag Economics, Panhandle REC