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Start formulating grain marketing plans

The best managers have already started scenario planning for stored grain, plus ‘23 and ‘24 crops.

Naomi Blohm, senior market adviser

November 3, 2022

6 Min Read
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Harvest is wrapping up for most Midwest farmers. And with grain prices still historically high due to tight U.S. and global supplies, many bin doors are starting to close with farmers content to sit back and wait until 2023 before making more cash sales.

While you may want to rest from the hectic rush of harvest, now is the time to scenario plan for the grain marketing opportunities in front of you now, and start thinking about marketing 2023 and potentially even the 2024 crop.

We are potentially entering our third year of a bull market, especially with the unrest still occurring with Ukraine and Russia, and a South American crop that is not yet made. However, take note, a third year of a bull market is not normal from a historical perspective. And while past performance is not indicative of future results, one has to think that at some point, high prices will cure high prices.

While there is no imminent threat to a price fall out, it is time to start to plan various scenarios that could unfold for the upcoming 2023 year and get your action plans ready. Be ready if the market is able to climb substantially higher due to poor South American weather; be equally ready in case prices drop due to a big South American harvest or a Black Swan that curbs demand.

Price breakout coming soon

Corn and soybean futures continue to consolidate overall into an ever-narrowing “pennant flag” formation on daily and weekly charts waiting for fresh signs of demand or signals of a potentially smaller U.S. crop or adverse weather in South America.

As I wrote about last week, just looking at the technical consolidation on a soybean chart, there is likely a $2.50 move potentially coming once the market price breaks out of this six-month pennant flag formation.

The month of November will bring plenty of news: another interest rate hike, the aftermath of the Brazilian presidential elections, U.S. elections, the November 9 USDA WASDE report, a potential railroad strike in the United States, the ever-spinning revolving door of the Black Sea grain corridor, and a shortened Thanksgiving holiday trade week, only to then return from the holiday week to receive our first glimpse of South American grain production weather.

Currently, these bits of news have a nearly equal balance of bullish and bearish fundamentals. That is why commodity prices continue to remain “stuck” in a holding pattern. Which way will the pieces of news ultimately fall and tip the price scale? Will prices race higher due to lower supplies, strong demand, and adverse weather in South America? Or will a snafu in global economics or global geopolitics spook prices lower?

My advice: Make a strategy that allows your farm to be prepared for either scenario. Don’t wait and see. Be ready to act.

Contingency plan

As a marketer you gather information, strategize that the market will trend in a particular price direction, and create a marketing plan to act accordingly. For example, let’s say you have an order in with your elevator, that should new crop (Dec. 2023) cash corn trade at $6.50, you’ll sell 10,000 bushels. You feel good. You have a plan!

Suppose though that your local cash market trades only up to $6.49, never hitting $6.50, and your order does not get filled.

Then, the market pushes lower. You have no contingency plan, the market goes the “wrong way,” and you have no plan in place to respond. You are left reeling and frustrated.

Good marketers have contingency plans in place, so they can act when they see opportunity or protect themselves against tumbling prices.

How does a marketer create a scenario plan?

It takes a well-balanced blend of fundamental analysis, knowing your local cash market, weighing both U.S. and global economic news, watching geo-political drama, understanding technical charts, and having discipline.

It may seem like a daunting task to learn how to scenario plan. However, the best of the best are already doing it.  Scenario planning is the process of creating possible future outcomes: sharply higher markets, markets that stay low for two years at a time, markets that stay consistent, but inputs costs that might fluctuate drastically.

Manage through uncertainty

Scenario planning is forward thinking. It’s preparing your farm for the unthinkable. I believe that markets will continue to be volatile in the coming years, and often times, better pricing opportunities arise when markets are uncertain, rather than when they are certain. That means you have to manage through uncertainty. You have to be ready with contingencies: sell, hedge, store, or whatever the appropriate action might be. At our firm, we call this Market Scenario Planning.

I don’t have to tell farmers how to manage through contingencies. You do it every day on your farm with your daily activities. Now you have a picture of how to apply that skill to commodity marketing. It’s what the best marketers will be doing in the year ahead.

Reach Naomi Blohm at 800-334-9779, on Twitter: @naomiblohm, and at [email protected].

Disclaimer: The data contained herein is believed to be drawn from reliable sources but cannot be guaranteed. Individuals acting on this information are responsible for their own actions. Commodity trading may not be suitable for all recipients of this report. Futures and options trading involve significant risk of loss and may not be suitable for everyone. Therefore, carefully consider whether such trading is suitable for you in light of your financial condition.  Examples of seasonal price moves or extreme market conditions are not meant to imply that such moves or conditions are common occurrences or likely to occur. Futures prices have already factored in the seasonal aspects of supply and demand. No representation is being made that scenario planning, strategy or discipline will guarantee success or profits. Any decisions you may make to buy, sell or hold a futures or options position on such research are entirely your own and not in any way deemed to be endorsed by or attributed to Total Farm Marketing. Total Farm Marketing and TFM refer to Stewart-Peterson Group Inc., Stewart-Peterson Inc., and SP Risk Services LLC. Stewart-Peterson Group Inc. is registered with the Commodity Futures Trading Commission (CFTC) as an introducing broker and is a member of National Futures Association. SP Risk Services, LLC is an insurance agency and an equal opportunity provider. Stewart-Peterson Inc. is a publishing company. A customer may have relationships with all three companies. SP Risk Services LLC and Stewart-Peterson Inc. are wholly owned by Stewart-Peterson Group Inc. unless otherwise noted, services referenced are services of Stewart-Peterson Group Inc. Presented for solicitation.

The opinions of the author are not necessarily those of Farm Futures or Farm Progress. 

About the Author(s)

Naomi Blohm

senior market adviser, Total Farm Marketing by Stewart Peterson

Naomi specializes at helping farmers understand how to manage cash marketing needs and understand the importance of managing basis, delivery point considerations, cash flow needs and storage capacity. She earned her Bachelor of Arts in Political Science with a minor in Agriculture Business at the University of Wisconsin in Platteville. She has a Master of Science in Adult Education with an emphasis in Ag Economics from the UW-Platteville and a Master Certificate in Global Education, from the UW-Oshkosh.

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