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Ag Marketing IQ: Many factors are adding uncertainty to the markets. Avoid the “wait-and-see” grain marketing approach.

Tyler Schau, Hedging strategist

February 29, 2024

4 Min Read
Unloading corn from semi at elevator
Getty Images/BanksPhotos

Greetings from Houston, Texas and the Commodity Classic! The last few days have been quite a shock to me weather-wise. On Monday, I was putting out hay in a t-shirt. Early Tuesday morning, I drove to the airport in the middle of a blizzard. When I got to Houston at noon, it was 80 degrees.

It reminded me of marketing grain over the last few years. It has been a wild ride full of highs and lows.

2 big questions

Since the last trading day in 2023, March corn has dropped from $4.71 to a low of $3.94 ½ on Monday, Feb. 26. As I type, March 2024 corn is at first notice day and is currently at $4.12 ½.

There has been talk in the market over the last few weeks about the March basis contracts that would need to get priced or rolled over the last week. The question has been: Will this week mark a winter/spring low in the corn market as the “hedge pressure” from farmer selling weighs on the market?

The other major discussion point over the last few weeks has been the “fund” position. According to the recent Commitment of Traders report from the CFTC, managed money funds were reported being short corn to the tune of roughly 340,000 contracts. This represents about 1.7 billion bushels of corn.

Has corn hit the bottom?

The two ideas listed above (combined with drought concerns creeping into South and North America and talk of China stepping in and buying some corn in the world) have a lot of folks wondering if we have found a bottom and if we will see a significant rally in the coming months.

Related:Are farmers truly undersold on 2023 corn?

We will not know the answer to that question until it is too late. So, the key is to control what you can control. And what you can control is how you react.

It is a common practice for the customers that I work with to pick a price where they would like to sell grain, watch it get to those levels, only to move the goal posts and shoot for a higher price. To avoid those errors in marketing, we encourage you to get your orders working – either with your cash buyer, or your broker to place hedges. We also encourage you to buy put options, or at the very least, pick a price where you will buy the options.

Take action

I could throw a ton of data and numbers at you on how high the market could go during a rally based on percentage moves during previous analog years. But at the end of the day, it is more important for the producer to focus on their decision-making during the coming months.

I know the 1.7 billion bushels that the funds are short makes people think there will be a significant rally. One specific date to pay attention to is Thursday, March 28. That day we will get the quarterly grain stocks as well as the March planting intentions report. This will tell us how much grain farmers are holding and how many acres do they intend to plant. It will also likely set the direction for the remainder of the spring.

Related:Are you still storing corn?

Just like I do not expect the weather roller coaster to end soon, I do not imagine the market will temper either. Uncertainty will remain. Use rallies to get caught up on 2023 crop sales as well as new crop sales. Finally, remember that no decision is still a decision, and oftentimes it is a poor one!

The risk of loss in trading futures and/or options is substantial and each investor and/or trader must consider whether this is a suitable investment. AgMarket.Net is the Farm Division of John Stewart and Associates (JSA) based out of St Joe, MO and all futures and options trades are cleared through ADMIS in Chicago IL. This material has been prepared by an agent of JSA or a third party and is, or is in the nature of, a solicitation. By accepting this communication, you agree that you are an experienced user of the futures markets, capable of making independent trading decisions, and agree that you are not, and will not, rely solely on this communication in making trading decisions. Past performance, whether actual or indicated by simulated historical tests of strategies, is not indicative of future results. Trading information and advice is based on information taken from 3rd party sources that are believed to be reliable. We do not guarantee that such information is accurate or complete and it should not be relied upon as such. Trading advice reflects our good faith judgment at a specific time and is subject to change without notice. There is no guarantee that the advice we give will result in profitable trades. The services provided by JSA may not be available in all jurisdictions. It is possible that the country in which you are a resident prohibits us from opening and maintaining an account for you.

About the Author(s)

Tyler Schau

Hedging strategist, AgMarket.Net

Tyler Schau joined AgMarket.Net, the farm division of John Stewart & Associates, as a hedging strategist in 2021. He was previously at Kluis Commodity Advisors. Tyler earned his B.S. degree in Agricultural Business and his M.S. degree in Agricultural Education from Iowa State University. In 2009, his family moved to Almont, ND where he became the agricultural economics instructor and the Farm and Ranch Management degree advisor at Bismarck State College. His teaching focused on risk management for producers.

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