Harvest is rapidly approaching. With a potential record crop in those fields, the harvested grain will need ample bin space for storage. The potential problem is that some farmers still have bins full of last year’s crop.

What’s happened

Those farmers with crops in the bin are running up against a time crunch. They are deciding if they should sell it soon or keep storing it in hopes of a price rally in grain futures in the coming weeks before harvest is fully underway.

First notice day for September 2024 grain futures is Friday, Aug. 30. That means anyone who is long September grain contracts in the futures market needs to exit those long positions by the close of business on Thursday, Aug. 29, or be at risk of physical delivery.

It also means that farmers who have been using basis contracts (based off the September 2024 futures contracts) for cash marketing, must decide very soon to either price out the contract or roll it out to December 2024 futures. The question really boils down to, “Is there any bullish news out there?”

From a marketing perspective

Corn futures have been in a steady downtrend ever since May 2024, thanks to the notion of a large crop growing in Midwestern fields and near perfect summer weather. Traders are focusing on a large old crop carryout, the knowledge that farmers still have corn in the bin to price, a large crop growing in fields, which combined, has U.S. farmers dealing with the reality of another year with a large U.S. 2-billion-bushel carryout.

I’ll be curt. For grain prices to resume an uptrend, we need a friendly fundamental catalyst to occur to get the funds to exit their near record short positions. We need the U.S. dollar to drop, a very early frost to hit the Midwest in early September, poor weather conditions in the world, and a major geo-political event to stir demand desires. That is a lot of pieces that would have to fall into place perfectly, to begin an uptrend rally for corn prices.  Still wondering what to do? Let’s take it a step further and look deeper at the notion of “price or roll.”

Looking to Price. If you are of the opinion that grain prices will continue to trade sideways to lower, then it likely makes sense to price out the basis cash contract. This means that you will call the elevator, take the current September 2024 futures price and apply the basis already locked in. Boom. The decision is made, and the grain is priced.

For many, the price is not glamorous. And for some, you may already be thinking, “But what if prices do actually rally in the coming weeks!?” You may then potentially feel like you were “foolish” for pricing “too soon.”

Fear not. This is where it might make sense for you to re-own on paper with a call option. For example, if you purchase a December 2024 call option, it will expire on Nov. 22. You pay a one-time option price premium (plus commission and fees), and no margin calls. You will have nearly three months to reap the benefit if prices rally due to a weather scare, a geo-political event, or a possibly a seasonal rally should the market find a “harvest low” in the coming weeks.

If the futures market rallies, you have the ability to take part in the rally. If prices do not rally, the most you can lose is the cost of the call option. For some, this may be a less expensive option when compared to the cost of storage for three months with interest payments.

Looking to Roll. If you are of the opinion that prices will rally in the coming weeks, then consider rolling your basis contract. Most likely you will roll to the December contract and pay the elevator a fee to roll the basis contract position. On basis contracts, a roll will subtract from one’s basis if the market is in a carry or add to it if the market is in an inverse. If the market rallies, you will capture the futures price gain. If prices do not rally, you are at risk of further price decline.

Prepare yourself

Time to get your head out of the sand. We feel it’s increasingly important to have a strategy moving forward with your grain. The trend is lower on both commodities, and it is getting increasingly expensive to hold crops.

Be ready for anything. The funds do hold a hefty net short position and current market perception continues to be negative. However, a glimmer of friendly news could spur short covering and a significant price corrective rally. However, a lack of friendly news will likely keep corn prices in a sideways to lower pattern for the short term.

Many price scenarios can unfold in the coming days. Manage your risk. Be ready for any surprise. Sit down and do the math and decide which scenario – price or roll – is best for your farm business.

Reach Naomi Blohm at 800-334-9779, on X (previously 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.