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Ag Marketing IQ: Here’s how you can establish a worst-case scenario for pricing your 2025 grain crop while staying open to take advantage of a possible rally.

JJ Keske, Ag risk management advisor

February 4, 2025

4 Min Read
Volatile market chart
Getty Images/TERADAT_SANTIVIVUT

Countless hours, sleepless nights and an insane amount of hard work goes into raising a crop and chasing higher yields. Let’s face it, many years the most stressful job on the farm is marketing your crop.

  • Do I sell into the rally?

  • Should I hold off until the time of year when we “usually” get a weather scare?

  • Can the futures market really fall any further?

These are all questions many farmers ask themselves year in and year out. This year another question is crossing the minds of many. What am I supposed to make of all the political headlines that daily affect the markets?

The beginning of Trump’s second term in the White House brought extreme volatility in all markets, including commodities. One main word has a lot of traders and farmers nervous: tariffs. Since before his term started, Trump consistently said the U.S. will use tariffs on several countries, enemies and allies alike. Most would agree that tariffs are bearish for corn and soybeans.

In his last term, we got into a trade war with China where tariffs were used by both parties. During 2018 and 2019, we saw huge falls in the soybean market when tariffs were rolled out or expanded. Over the last few weeks Trump made it known he intends to apply tariffs to Mexico, Canada and China, three of our largest trade partners. Will they retaliate with their own, sending corn and soybean futures in a free fall? Are these threats scare tactics? Will we make trade deals? No one knows for sure!

Related:Prepping for planting

In this “headline crazy” type of climate, how should we be marketing our crop?

I highly recommend using options alongside physical sales to take action but remain flexible. Using puts and calls, you can establish a worst-case scenario for your crop pricewise and still stay open to taking advantage of a possible rally.

A couple of other benefits of options are that you are not locked into delivery and you can manage them throughout the year. Options are extremely customizable to what you are looking for, whether it’s protecting the highest price possible or building a low-cost floor below the current market.

Let’s look at how a farmer could use physical sales and options to market his whole corn crop before he ever plants a seed.

This farmer produces 100,000 bushels of corn. We will use four different strategies that are available today, Feb. 3, and break them up evenly into 25,000-bushel chunks.

  • 25,000-bushel sale to elevator at $4.65 futures

    • No upside and no downside, his price will stay at $4.65 no matter what happens between now and harvest.

  • 25,000-bushel sale to elevator at $4.65 futures and buys 25,000 bushel of December $4.80/$5.80 call spread for 21 cent cost

    • Net floor of $4.44 ($4.65 sale minus a 21-cent call spread cost)

    • A potential dollar upside if the market rallies after he makes this sale.

  • 25,000-bushel of December $4.50 puts at 30-cent cost

    • Net floor of $4.20 ($4.50 strike level put minus a 30-cent put cost)

    • Unlimited potential upside if the market decides to rally.

  • 25,000-bushel of December $4.60/$5.60 put-call spread costing 21 cents

    • Net floor of $4.39 ($4.60 strike level put minus a 21-cent position cost)

    • Net ceiling of $5.39 ($5.60 strike level call minus a 21-cent position cost)

    • This position comes with margin risk if the market rallies.

Related:What could spur a corn price rally?

These four positions protect a floor on the farmer’s entire crop, leaves a capped upside roughly a dollar above the market on 50% of it and another 25% of the crop has unlimited upside. He only has 50% committed to an elevator at this point.

  • If by the end of harvest December futures have fallen a dollar to $3.65, his average price would be $4.42.

  • If the market stays flat through harvest and December futures are still at $4.65, his average price would be $4.47.

  • If the market rallies a dollar and December futures are at $5.65, his average price would be $5.17

Related:Can Brazilian corn farmers make a profit?

As you can see, this combination allowed this farmer’s whole crop to have a floor just 23 cents below the current market if corn futures fall and gain a decent amount of a rally if we see one. This farmer would be able to remain flexible with delivery locations and timeframes and could even manage these positions if they choose to throughout the growing season.

The flexibility provided by options is always valuable, but even more so in a politically charged environment like we see today.

I strongly recommend finding someone to learn from and work with. Don’t let a tweet about tariffs take your farming operation from the black to the red overnight. Take control of your marketing plan and cheer for volatility instead of letting it stress you out.

For more insights and personalized advice, consider consulting with a professional risk advisor. Their expertise can guide you through these volatile times, ensuring that your marketing strategies are both effective and resilient. With the right plan in place, farmers can navigate the uncertainties of the market and make informed decisions that support their financial success.

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.

Read more about:

Crop Prices

About the Author

JJ Keske

Ag risk management advisor, Advance Trading Inc.

JJ is an Ag Risk Management Advisor for Advance Trading’s Brocton, Illinois branch office. He covers customers all over south-eastern Illinois. JJ grew up on a family farm in southeastern Wisconsin and moved with the family farm down to Brocton, Illinois in 2011. He graduated from the University of Illinois with a Bachelor’s degree in Agribusiness Markets and Management. JJ currently lives in Oakland with his wife. He is a huge sports fan, and when he is not in the fields, he can be found watching football all Sunday long.

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