Farm Futures logo

Ag Marketing IQ: Take control of your 2023 and 2024 production – regardless of market direction.

Kent Stutzman

December 19, 2023

5 Min Read
Market charts representing volatility
Getty Images/iStockPhoto

The 2023 calendar year is ending, but for many, marketing decisions still need to be made for the 2023 crop. Additionally, we must start planning for the 2024 crops. Let’s review several things that you need to watch as we market these crops.

For 2023 corn, I think it must be stated that farmers own a larger percentage of this crop compared to the past two years. Since harvest, we have seen the board working lower. Farmers are likely looking at a lower price today compared to what they had across the scale at harvest. We still need further rallies to return to previous levels. Storage costs also need to be considered. If hedges were in place, or put options were used, farmers are still okay. Some areas have seen end users looking for corn, and these are good opportunities to get grain sold. In many areas, enough corn is moving that end users haven’t needed to look hard to source their supply yet.

Consider put options

Potential rallies in corn could stem from weather concerns in South America – unless the January crop report surprises us. Safrinha corn planting in Brazil won't occur for at least another month, so we still have time before those concerns significantly affect the market. Farmers might need to be prepared to hold onto corn longer to see substantial market movement. Again, if your corn isn't covered, I would suggest considering put options if you're unable to sell physical corn. If the corn has been sold or you need the cash and plan to sell the corn, you can explore call options to remain in the market. Considering interest rates, this might be a more cost-effective way for some of you to have ownership of corn.

As for 2024 corn, futures are hovering near $5.10. This could potentially be an excellent price by the next harvest. Some initial estimates for U.S. corn ending stocks are well over 2.5 billion. While a lot can happen between now and then, it's difficult to envision prices remaining at this level if there are no issues. Combining sales with put options seems to be a good strategy. Input costs are getting locked in, so getting the price locked in on the corn makes a lot of sense here. You can get floors in place and leave your upside open if something changes going forward. Being proactive now seems much better than being reactive later.

Account for the cost of carrying beans

Farmers have done a better job of marketing 2023 beans because beans have rallied from the harvest low. At one point in November, January futures had rallied $1.28 from the harvest low. Farmers and elevators alike have been moving grain since harvest. Interest costs for soybeans are an even more significant factor than with corn, equating going forward to around 8 cents per month for many holding onto beans. For some farmers, holding beans long-term seems like a risky proposition. Recently, I examined forward bids for a farmer, and there was a 40-cent carry if they held onto beans until June. However, the interest to hold beans until then would be a minimum of 48 cents. It’s simply too risky to hold onto beans very long unless you are hedged or have put options protecting you.

Looking ahead to 2024, we've seen futures above $13, but we're currently below that mark. Discussion revolves around South American weather. Crop estimates have decreased, but not enough yet to justify a substantial market rally. If the rains continue to be less than ideal, we could see further reductions, which could bring some excitement to the market. However, we can't solely focus on Brazilian weather. Last year, Argentina only grew half of a crop because of their drought. At this point, Brazil could lose even more production, but the entire South American crop might still be larger than last year, because of Argentina.

U.S. traders expect more bean acres in 2024. While I can see that happening, we may be surprised that corn acres aren’t down as much as expected. Input costs are lower, and we experienced favorable conditions this fall for fieldwork. To prepare for any scenario going forward, create a plan with flexibility to market changes. I have laid out many things that could affect market direction, but we all know that something unexpected likely will happen.

Protect against downward movement

Are we prepared for a big drop in market price? Conversely, are we prepared if this market rallies sharply? Take control of your 2023 and 2024 production. The best way to do that is to protect it from further downward price movement, but to also keep your upside potential open. Various strategies can be implemented to take control of the “what ifs” and help you sleep at night regardless of market direction.

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.

About the Author(s)

Kent Stutzman

Advance Trading, Inc.

Kent grew up on farm near Toluca, IL and graduated from Illinois State University with a degree in Agriculture Business. Before beginning his career at ATI in 2009, he was the Assistant manager of Heritage Grain Company in Dalton City, IL and the General Manager of Stanford Grain Company in Stanford, IL. He and his wife have 3 children and enjoy traveling, many sports, and outdoor activities.

Subscribe to receive top agriculture news
Be informed daily with these free e-newsletters

You May Also Like