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Are the harvest lows in for corn and soybeans?
Ag Marketing IQ: Manage market positions to overcome global disruption and unpredictable prices in the grain market.
3 Min Read
Getty Images/DarcyMaulsby
Two different contacts recently asked me the same question: “Do you think the harvest lows for corn and beans are in?” I preface my answer to this question the same way every time – by noting the futility of price prediction.
Look at U.S. yield. Early U.S. yield trends have shown variability. While there have been reports of record yields, others have been disappointing. Earlier this month, the USDA surprised the market with a larger-than-expected national average yield of 183.6 bushels per acre. However, it should be noted that lower yield estimates compared to August were seen for Illinois, Minnesota, Ohio and Wisconsin.
Then consider global yield. Additionally, the crop size in Ukraine—a key exporter—is a wildcard. Many argue that the USDA’s current production estimate of 27.2 MMT is overstated given the prolonged period of hot and dry weather this summer.
This unpredictability underscores the need for caution and vigilance in your marketing strategies.
Then there's demand:
Look at U.S. exports. The latest 4-week export sales pace for old/new U.S. corn is at a 5-year high. Moreover, unshipped export sales of U.S. soybeans are now down just 5% from last year after a very slow start.
Consider worldwide disruption. It's crucial to be aware that a “black swan event”—a rare and unpredictable event often with significant negative consequences—may occur. This could be political, economic, or even something unprecedented, like the coronavirus outbreak a few years ago.
In the current environment, the risk of a “black swan event” having bearish price consequences for 2024 and 2025 prices is notable. The sum of all these factors is increased uncertainty, but awareness of the potential impact of 'black swan events' can help you prepare for unexpected market changes.
It is recommended to manage market positions rather than predict prices. We previously highlighted tools available to turn market uncertainty into opportunity.
Manage market positions
One of the essential ingredients for successful marketing is discipline. In this context, discipline refers to “a rule or system of rules governing conduct or activity.” Disciplined marketers prioritize risk management strategies. Choosing a disciplined approach involves resisting the urge to react impulsively to market fluctuations and instead focusing on achieving strategic marketing goals over time.
Markets are unpredictable and can swing sharply higher or lower depending on changes in supply, demand, or any “black swan event” factors that emerge.
How would exercising discipline in marketing apply in this environment? Follow a system of rules for managing positions during periods of increased market uncertainty, regardless of market direction.
Note: This process avoids any hint of price prediction, such as "when the market reaches a certain level, action will be taken."
Emphasis, instead, is placed on managing specific positions to provide flexibility and protection during times of heightened uncertainty. Ongoing contact with your trusted risk management advisor and diligent execution of risk management strategies are prudent.
Contact Advance Trading at (800) 747-9021 or visit 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 does not necessarily indicate future results.
The opinions of the author are not necessarily those of Farm Futures or Farm Progress.
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