June 20, 2023
A catchphrase commonly used in market management is to "transform uncertainty into opportunity."
We’ve certainly had uncertainty during this growing season so far. The sudden dryness lingering throughout the Corn Belt has resulted in comparisons to 2012 and 1988. While I recall the 2012 drought vividly, my recollection of 1988 and its impact on agricultural production is rather limited. I do remember that in 1988, the scarcity of water at the lake prevented us from engaging in water activities during my summer camp. Nonetheless, it presented an opportunity for new and different activities, brought about by circumstances beyond our control.
As a grain marketer, what are the new opportunities brought on by this uncertainty? Prices have rebounded to levels not seen since before the Planting Intentions & Stocks report on March 31, 2023. December '23 corn has climbed back to nearly $6 per bushel, while November '23 soybeans have rallied above $13, and July Chicago wheat is approaching $7.
Are you capitalizing on this opportunity?
For the old crop, it is hoped that most of the crop has been sold. However, you can still benefit from potential upside by using August or September call options that extend beyond and through the pollination period of the '23 production.
As for the crops currently growing in the field, you may not have a clear idea of your production or bushels at this point, but there are still measures you can take to safeguard those uncertain bushels. A put option provides a price floor without production risk. If you haven't made any sales yet, these price levels might offer a second chance compared to levels unseen in the past two, three, or even six months! December corn has rallied over $1 from contract lows in just a month. Maintaining a call option on these sales instills confidence in executing the sales while knowing that you can still benefit from further price increases. In a span of just over two weeks, November '23 soybeans have surged approximately $2 higher.
The uncertainty surrounding this growing crop also presents opportunities for us to plan ahead. December '24 corn is approaching $5.40, while November '23 soybeans are hovering around $12.40. During the 2022 growing season, the months of May and June provided favorable levels at which to sell or protect your ‘23 crop, despite it being quite a while until its realization. The current rally is bolstering 2024 prices, and we aim to assist you in establishing price floors while maintaining flexibility during this "weather market."
I distinctly recall how emotions could cloud rational thinking during the drought of 2012. I am already hearing some apprehension regarding the possibility of significantly reduced yields this year. Our role is to help you maintain discipline and eliminate emotional influences from your grain marketing decisions. We can discuss potential yields based on your Actual Production History (APH) and utilize years like 2012 as recent benchmarks to provide insight into potential outcomes.
Even though 1988 and 2012 were both hot and dry years, there were significant differences in seed technology. The weather in July could undergo dramatic changes, and the potential for exceptional yields may still exist.
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.
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