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There are solid risk management moves you should consider, even now.

Matt Bennett, Commodity analyst

August 6, 2021

5 Min Read
Compilation of market graphs and trendlines

As we have moved into the all-important month of August, commodity markets have been uncharacteristically quiet. July is typically volatile, but both corn and bean markets have strayed from the norm.

So how should producers tackle this situation?

The last time I wrote about these markets, we’d lost 93 cents in five trading sessions with regards to December corn. The move down to $5.07 was a sharp one, but since then, the highest trade we’ve seen for December corn has been set at $5.73. So, in a month’s time, we’ve moved about two-thirds as much as we moved in just five days after the July USDA report was issued.

After seeing Dec. trade to $5.73 on July 21st, we have only traded as low as $5.32 since. So, our trading range for the last 13 sessions has been much smaller than we’d become accustomed to. In fact, depending on the day you look here lately, $5.50 has popped up time and again as a comfortable place for Dec. corn to trade.

Soybean trading range

While beans are typically quite volatile as well in July, they have also worked their way into a trading range. While the post-report bearishness drove them down to $13.09 per bu., the highest trade we’ve seen since then has been $14.09 on July 19th. Since then, we’ve tried to move back towards that post-report low but have been stuck in the range between these two prices.

Yes, it’s a dollar range. But given we saw corn move a dollar in 5 sessions earlier in the summer -- as well as beans moving from $14.64 on the 11th of June down to just $12.40 six days later on the 17th -- this bean range seems fairly tame.

My thoughts on why these ranges have been established are a combination of things. Given extreme tightness for both corn and beans, some in and around the trade seem hesitant to sell when we see good weather for a big part of the corn-belt. Additionally, those hesitant to sell point to extreme dryness in parts of the northwestern corn-belt as taking the shine off of what many see as a big crop.

The other big topic for ‘bulls’ in the market is the downward spiraling safrinha crop in Brazil, which continues to be cut seemingly on a daily basis.

On the flip side, those reluctant to buy look at states like Indiana, Illinois and Ohio where potentially all-time record yields provide headwinds to these markets. Combined with a few cancellations from China for corn exports as well as a slower crush margins, and the bears in these markets have their line drawn in the sand as well.

What to do now

So, what does a producer do with markets that are range-bound? While there are trades, like selling straddles, that have worked well in this environment, they certainly can add risk to a person’s profile. As a producer, looking at ‘dead’ markets like these isn’t all bad. In all honesty, the market closing at $5.56 ½ Dec. corn and $13.36 ¾ Nov. beans isn’t anything to scoff at. Producers who have been blessed with good rain over the summer of 2021 have enjoyed what has generally been a rare situation -- a rally to go along with their rain.

While I see no situation where a person growing an APH-type crop can go wrong at these price levels, I understand angst about getting heavily sold before the crop is harvested. Last year’s Derecho event in Iowa is one of the main reasons that come to mind. However, getting floors set in place under corn and beans that are in excess of a producer’s comfort zone on physical sales makes all the sense in the world. This market being dead can certainly lull a person to sleep. The last thing we want to do is miss a month’s-long opportunity to market at levels we’ve been dreaming of the last few years. At the very least, I’d hope producers feel compelled to lock in some worst-case scenarios.

Feel free to reach out to me or anyone on the AgMarket team. We’d love to hear from you.

Reach Matt Bennett at 815-665-0462 or [email protected]

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About the Author(s)

Matt Bennett

Commodity analyst, AgMarket.Net

Matt is a Windsor, Ill., farmer and former grain elevator owner. He is Channel Seed’s grain marketing consultant and holds a Series 3 brokerage license doing business through AgMarket.Net, Farm Division of JSA. He specializes in formulating risk-management strategies for corn, soybean farmers and livestock producers. A graduate of University of Illinois, Matt and his wife Tiffany live on the family’s centennial farm where they raise their five children.

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