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December 5, 2023
Many of you are wrapping up marketing decisions for 2023 and sitting in a great spot. Others are playing catch-up. Those who put off risk management and are playing catch-up are the ones most unhappy with current market prices for both grains and livestock.
Before we look forward, let’s take a look back at what December 2023 corn and November 2023 soybean contracts have done in the past year.
Since January 1, December 2023 corn futures rallied to a high of 6.29 ¾ on June 20, then traded to a low of 4.47 on Nov. 29. Since the start of 2023, December 2023 corn traded in a $1.82 bushel range.
When we look at this range as dollars per acre, this equates to a $364 per acre change in gross revenue for 200 bushel per acre corn. It is significant!
Something to think about: December ’23 corn $5.50 put options traded for 25-30 cents during December of 2022. The put was roughly 50 cents below the market at the time. The cheapest the put traded was 18.5 cents on June 22 when the corn market was reaching it’s high for year on U.S. weather concerns. At expiration, the December $5.50 corn put expired 87 cents in the money.\
Since January 1, November 2023 soybean futures rallied to a high of $14.35 on July 24, just after trading to the calendar year low of 11.30 ½ on May 31. Since the start of 2023, November 2023 soybeans traded in a $3.04/bushel range.
Related:Don’t bet on another black swan
When we look at this range as dollars per acre, this equated to $243 per acre on 80-bushel beans. Once again, it is significant.
These markets trade a significant range. This isn’t an anomaly when we look back across recent history – these types of ranges are quite common.
When we look forward from here, I would expect similar volatility as we finish up old crop and conquer new crop marketing. It is absolutely impossible for anyone to predict how the next six months to a year will play out.
We can think of and list so many factors we know will impact the market; South America production, geopolitical conflict, federal monetary policy, and the U.S. election are just a few that come to mind. What we have to watch out for is something unexpected that “changes the game” and impacts your market in an unpredictable way. These unexpected things are what wreck a marketing plan and leave you in a pile of regret.
As a producer, we have two timeless marketing conundrums we are tasked to solve each year. This first is having too much grain and/or livestock sold when markets go up. And the second is not having enough grain/livestock protected when markets go down. Using options can help gain a broader control of your price risk while positioning you to benefit if markets move higher.
It’s easy to get hung up on the nickels and dimes of marketing, but don’t let those nickels & dimes end up costing you dollars. Reach out and we will gladly teach you how we help you use these tools to enhance your current marketing plans.
At the end of the day, developing a plan, choosing the tools you use and managing risk are choices you have to personally make – nobody can make that choice for you. I encourage you to use tools that help you make the difficult marketing decisions a little easier and tools that defend your bottom line from lower markets while leaving opportunity open to benefit from higher markets.
And finally, be careful what you feed your mind and how the information you consume impacts your marketing decisions. The loudest voice in the room might not be carrying the message you need to hear. Best wishes as we wrap up 2023.
Contact Advance Trading at (800) 747-9021 or go to www.advance-trading.com.
Information provided may include opinions of the author and is subject to the following disclosures:
The risk of trading futures and options can be substantial. All information, publications, and material used and distributed by Advance Trading Inc. shall be construed as a solicitation. ATI does not maintain an independent research department as defined in CFTC Regulation 1.71. Information obtained from third-party sources is believed to be reliable, but its accuracy is not guaranteed by Advance Trading Inc. Past performance is not necessarily indicative of future results.
The opinions of the author are not necessarily those of Farm Futures or Farm Progress.
Risk advisor, Advance Trading, Inc.
A Dodge City native, Brady joined Advance Trading in 2017. After graduating from Kansas State University, he spent the first four years of his career as a crop scout and advisor, assisting dryland and irrigated farmers with production decisions. Prior to joining ATI, Brady led a specialty corn project in western Kansas, working with both producers and end-users. At home, he enjoys spending time with his growing family, raising Angus cattle, coaching kids wrestling, and an occasional round of golf.
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