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May 31, 2022
Memorial Day weekend is often referred to as the unofficial start of summer. It’s also when corn price volatility often increases amid uncertainty surrounding the critical northern hemisphere growing season.
It’s hard to believe that at the start of the 2021/22 marketing year in September, July corn futures were trading just above $5.00. The fundamentals have changed since then. The biggest change has been Russia’s invasion of Ukraine in late-February. That disrupted corn exports from Ukraine and helped support increased U.S. corn exports this spring. Since early February, July corn futures have rallied more than $1.50.
December 2022 corn futures on Friday closed at $7.30, which is the highest price ever for December corn at this time of year. Similarly, November 2022 soybean futures on Friday closed at $15.44, which is the highest price ever for November soybeans at this time of year.
In the context of developing and implementing a risk management strategy, what have we learned the past few months that can help you to be successful with your marketing this summer?
First, and most importantly, it re-affirms that price prediction is impossible. Nine months ago, very few were talking about an invasion of Ukraine by Russia and the possible market impact. And while the rally has met the need to offset the rising cost of inputs, there is no guarantee it will stay at these levels, or even, to go higher. As a marketer, you must take a disciplined approach to your business that does not involve price prediction.
In addition, change in market trend happens and often at very fast speed. This is probably truer today than it’s ever been, given the geopolitical uncertainty in the world at the moment. Case in point: Crude oil is sharply higher today as European leaders take a hard line against Russian oil. The EU plans to ban 90% of Russian oil by the end of 2022.
The funds make an impact on markets each day when they trade the headlines. As the market moves in a response to geopolitical activity, anything is possible, and nothing is certain.
And third, a consistent approach to marketing helps reduce the emotions associated with selling the grain. In these volatile markets, emotions can gain ground—and understandably so as it is your livelihood. But it is imperative you stay the course in your marketing plan. The purpose of the plan is to take advantage of higher prices and to prepare for a price drop. With these key elements in place, you can put the emotions of marketing to rest and block out the noise of market sensationalists and the worry they cause from your mind.
Just as the past few months have contained some unexpected developments, more surprises—bearish and bullish—are likely to be seen before the 2022 corn crop is ready to be harvested this fall. Keys to successful marketing in this type of environment include preparation and execution of a flexible and disciplined risk management strategy. As always, your Advance Trading advisor is ready to assist in developing a marketing program to defend your balance sheet.
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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