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Grain marketing in an era of uncertainty

Richard Hamilton Smith corn-583645516.jpg
As margins tighten, having a solid marketing plan in place seems more critical than ever.

The trading sessions late last week were a reminder of how challenging and emotional marketing a crop can be. This had me thinking of the different slogans that come to mind throughout a marketing year.

Ten days ago, the phrase in the back of my mind as I talked with producers was, “a true bullish market doesn’t give you an entry point.” The corn market sustained a strong rally in corn for thirteen straight sessions with support from energy, strong processor margins, and the uncertainly about pricing or availability of inputs for Safrinha (Brazil’s second corn crop) as well as the U.S. 2022 crop.

All these headlines continued to “feed the bulls.”

It felt as if buyers would never get a chance to get in the market, just like in 2008, 2012 and as recent as last fall. With harvest winding down, one could get complacent as the harvest lows seemed to be in and higher prices should prevail into planting.

The cure for high prices

As we rounded out last week, the climate of the market shifted and the phrase that came to mind was, “high prices cure high prices.” Exports are always the first casualty of this phrase. We have become such a global market that the world end-user no longer must wait for the U.S. new crop to satisfy demand. With the large uptick in production in Brazil and Argentina we have a “new crop” every 6 months now.

As traders work to get an edge and predict exports by tracking the current week’s numbers versus prior year numbers, through weekly export inspections and sales at different times of year, the USDA has the final say. Every month the USDA will adjust monthly WASDE reports (along with other categories). Be on the lookout for the November report this week on Tuesday at 11 a.m. CST.

As harvest comes to an end many producers have already begun to plan their operation’s 2022 plantings through evaluating production history and input costs. The markets are no different and have already started to try and predict what the 2022/23 crop balance sheet will look like.

This brings me to my final phrase – “They call them futures because they are always trying to predict the future.” Just late last week USDA published its initial baseline estimates for next year. These estimates would be bearish corn and bullish soybeans as they predict corn ending stocks growing to nearly 1.935 billion bushels with planted acres at 92 million and soybean ending stocks maintaining around 300 million bushels with planted acres at 87.5. This feels like a 180-degree about-face from what the market has been digesting with all the talk of nitrogen running to $1,200 per ton and uncertainty around availability of nitrogen and chemicals for the 2022 planting. Most analysts and producers have been penciling an increase in soybean acres at the expense of corn with closer to a 90 / 90 million acre split this next year if input costs don’t come down.

Seasonal trends over the past 20 years highlight the desire to market grain during the spring and summer, but as inputs rally and margins tighten, having a marketing plan in place this year seems more critical than ever. There are avenues today to protect these historically high prices on both corn and beans while maintaining the flexibility to participate in a rally during the spring and summer should production and demand warrant it. We may never be able to predict the future, but the markets will continue to try, tick by tick. 

Reach Josh at 309-664-4374. Contact Advance Trading at (800) 664-2321 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. 

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